S&P 500, DAX, Euro Stoxx 50, FTSE 100 Futures Outlook: December 6, 2012

FTSE had a stab at breaking October/November highs at 5903/07 and managed to reach 5918, but with the market overbought on daily charts this could not be sustained and we quickly came back below 5900. Shorts were not stopped out as we held below 5933. Support today seen at 5879 then below yesterday’s low at 5966 we should see 5955. Below here we have better support at 5840/37 and a good chance of a low for the day.

Longs here will need a stop below 5915 however as this would risk a move to 5793/90. Shorts from the October/November highs at 5903/07 will need a wide stop above the September highs of 5933 as these are such important resistance levels. Buy back in to longs above here as this negates the downside pressures and should lead us higher for a test of 2012 highs at 6000.

DAX surprised with an open above 7500, reaching 7507 but this lasted seconds as sellers quickly took prices back below Monday’s 7489 high. Clearly there is a battle going on but unless we see a close above 7500, we still favour the bears with the daily stochastic now topping and turning lower.

Today the 3-week up trend comes in at 7490 so below here we could experience selling pressure down to 7449. Yesterday’s low was 7428 and below here we test the week’s low at 7414. A break here today should lead us to good support at 7383/75 and a chance of a low for the day if seen.

Any longs here looking for the bounce will need a stop loss below 7355 for 7317 next target. A break above 7507, and preferably a close above here too, would negate the negative signals and put bulls back in control as we target 7547, possibly 7559. A push through here would then allow a test of 2011 highs at 7624.

Eurostoxx surprised with an open above 2600/08 and a high tick to 2614 but the market pulled back within seconds and eventually came close to testing support at the week’s lows of 2574/73. Yesterday’s break higher, but failure to close above 2608 is not particularly positive. We did hold the 3 week up trend which is at 2588 today but if this is broken today, we look for 2577 with better support at 2568/66.

This level may hold the low today if tested but any longs here will need a stop below 2555 for a test of 2541/39 support next. We should bounce from here but if we break 2532 we could see 2519 next. 2608 is the level to watch on the topside of course and should offer tough resistance. The daily stochastic has topped and turned lower which may be a warning of weakness to come. On a break of yesterday’s high at 2614 however, we run up to the 61.8% retracement level of the losses from the highs in 2011 at 2638, so very tough resistance. Attempt shorts once again with a stop and reverse in to longs above 2650.

S&P broke 1402 but only fell as far as 1397, not reaching 1392 support as we shot higher to test the 1414 resistance which held the topside as expected. There is nothing at this stage to change our negative outlook going forward. We closed below the 100 day moving average for the third day in a row and below 1407/05 today we look for 1398/97 to be tested again. A break lower is possible for extremely good support at 1392.

This should hold a slide initially so look for a low for the day. Longs will need a stop below 1388 however for a test of the next support at 1383/82. 1414 remains stiff resistance, but if we push through 1416 look for 1420, may be even Monday’s high at 1424. This is a 61.8% recovery of the September/November sell-off which triggered Monday’s bearish key day reversal. A retest offers a second selling opportunity as we look for a double top here this week.

This would reinforce the negative outlook and it is worth us trying shorts here from a risk vs. reward point of view, with a relatively tight stop above the November highs at 1432. A break above here would eliminate downside pressure putting bulls back in control for a run to 1445.