Chart 1: European stocks have become very oversold in recent days…
The recent correction in equities has been led by European equities. However, that trade is now becoming quite oversold from the short term perspective. Various technical indicators such as RSI, Bollinger® Bands and breadth readings are now suggesting that a rebound should be in cards.
In Chart 1 above, we can see that the SPDR DJ Euro STOXX 50 (NYSE:FEZ), the European equity ETF, was trading almost 3 standard deviations away from the 50 day mean. Furthermore, RSI readings suggest that the sell-off is now overdone. Finally, Chart 2, below, shows that breadth readings for MSCI Europe are the most oversold since middle of 2013, with only 14% of index components trading above their respective 50 day moving average.
Chart 2: … with only 14% of MSCI Europe trading above 50 day MA!
