In the complex European stock market, bulls and bears – bulls and bears, as they are called in market jargon – are engaged in an intense short-term battle. The outcome of this confrontation will be decisive in discerning whether we will witness the highly anticipated Christmas Gathering or, on the contrary, whether we will face a final part of the year and a start to 2025 that could be dyed red. In the worst case scenario, we would face falls of 10-15% in the EuroStoxx 50, which would return the main European benchmark to levels of a year ago.
To anticipate, it is crucial to focus on the support zone marked by the August lows of the EuroStoxx 50 Total Return, an index that integrates the impact of dividends and which, with the German DAX 40, is currently the most reliable compass to follow. the evolution of stock markets in the Old Continent.
Specifically, I’m talking about the SX5R’s 10,900 point, a level that acts as a confirmation line for a possible bearish reversal pattern known as a double top. If this trend were confirmed, the minimum fall target, resulting from the projection of its amplitude, would be 10% lower, but I’m talking about maximum declines of 15%, because if it lost support, I couldn’t even rule out a decline to levels that would represent a 38.20% Fibonacci correction of the entire rise that the stock markets European countries have experienced the lowest of 2020 since.
Operational strategy for critical support
On the operational level, I propose to manage a stop every week in the 10,900 pointsmeaning we will only execute sales if this level is lost before Friday’s close. In case the market approaches the August lows without breaking them, it does not seem like a bad idea to buy European stocks again around August. 10,900/11,000 pointsbecause they offer an excellent risk-return equation.
That same week, the EuroStoxx 50 Total Return hit a low of 11,053 points, just 1.3% of this key support. In this context, it would be ideal for the market to threaten to break through this level and then execute a reversal, a technical figure that usually marks significant turns, especially if an upward gap appears in that turn. If this happens, We would be faced with an unbeatable opportunity to position ourselves upwards: The risk of purchasing in this area would be minimal compared to the potential reward.
The first upward objective would be at the annual highs, located at 10%. An overrun would open the door to further increases, possibly of at least another 10%. In total, we could talk about potential increases of between 10% and 20% if the support of 10,900 points remains firm.
It’s time to act, with caution
Therefore, if you ask me, I will tell you that now is a better time to buy than to sell, always keeping in mind that if critical supports are lost we will have to retreat. go to winter quarters. The main thing is to be disciplined and not lose sight of these strategic levels.
The 10% rule in the United States
On the other side of the Atlantic, those who followed my recommendations two weeks ago weathered the recent declines without problem. Reducing exposure by 25% of invested capital, or selling 25,000 euros out of 100,000, gave them liquidity to take advantage of opportunities. Now this ammunition You can head to Europe or be reserved until North American indices fall by 10% since its last peak, a rule that worked very well last August.
In summary, although the European market is facing a decisive moment, the scenario continues to offer attractive opportunities if we manage risks precisely. The key to a possible Christmas gathering lies in the support of 10,900 EuroStoxx 50 points Total Return. It will depend on whether we close the year with optimism or whether we face a more difficult start to 2025.
