The Euro Stoxx 50 cash index traded higher on Monday, breaking above the peak of December 28th, at around 4325. The move confirmed a forthcoming higher high, and thereby, the continuation of the recovery started on December 20th. Thus, with that in mind, we will consider the near-term picture to be positive.
In our view, the bulls could soon target the 4370 barrier, marked by the high of November 22nd, which if also broken, could pave the way towards the record high of November 18th, at 4415. Now, in case market participants do not stop there, and break that zone as well, the index will enter uncharted territory, with the next area to consider as a resistance perhaps being the psychological zone of 4500.
Shifting attention to our short-term oscillators, we see that the RSI rebounded again and crossed above its 70 line, while the MACD, although positive, has just crossed above its trigger line. Both indicators detect strong upside speed and corroborate the view for further advances in this index.
In order to abandon the bullish case for a while and start examining whether we entered a decent corrective phase, we would like to see a dip below 4235, the low of December 27th. The bears could then take charge for a while and perhaps pave the way towards the low of December 22nd, at 4166, or the 4135 barrier, marked by the low of December 14th. If they are not willing to stop there either, then we could see them diving towards the upside support line drawn from the low of May 13th, or the 4055 zone, near the low of December 20th.
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