The Euro Stoxx 50 cash index traded higher on Friday, breaking above Thursday’s peak, at around 3290. Overall, the index is not only trading above an upside support line drawn from the low of March 16th, but also above a steeper line drawn from the low of May 14th, as well as above all three of our moving averages on the 4-hour chart. Therefore, having all these technical signs in mind, we would consider the near-term outlook to be positive.
If the bulls manage to recharge soon, we may see them aiming for the 3470 territory, which is defined as a resistance by the high of March 4th. If that level is not able to withhold the advance, then its break may set the stage for extensions towards our next potential resistance zone, at around 3600. That area stopped the price from moving higher on February 26th.
Shifting attention to our short-term oscillators though, we see signs that a corrective setback may be looming before the next upside leg, perhaps for the index to test the 3290 area as a support this time. The RSI shows signs of topping within its above-70 zone, while the MACD, although above both its zero and trigger lines, shows signs of topping as well.
In order to start examining the case of a larger correction to the downside, we would like to see a dip below the short-term upside line drawn from the low of May 14th, as well as a push below 3225, marked by Thursday’s low. Such a move may open the path towards the inside swing high of May 28th, at 3105, the break of which may extend the slide towards the 3025 hurdle, which runs slightly below the low of May 29th and is marked by the inside swing high of April 30th.