EWI Italy Daily Chart

Italy dropped 9% to 12.30 on 11/9/11. The selling was in concert with Italy's 10-year bond yield moving above 7% and a yield curve inversion between 2's and 10's. The red lines show a small inverted H&S with head at 11, neck line at 12.5, which is a target of 14 that was achieved. A larger inverted H&S is shown by the blue lines, where a right shoulder would be playing out currently around 12-ish, but with the problems in Europe, do not hold your breath for this pattern to develop.

The green lines show the September positive divergence that easily called the bottom and the bounce. Late October shows a little two-day island where price dropped back down to create an island reversal. For October, the MACD histogram, stochastics and money flow negative divergence caused the spank down in price, but note that RSI and the MACD line would like to see a matching or higher high as compared to the high at 15.0. The 20 and 50 MA's are lining out sideways and price should work thru the 12-14 range moving forward, and, more broadly, 11-15. If the 20 MA falls back under the 50 MA that will signal a new round of trouble is at hand. Price will move sideways going forward, reacting daily to the bond yields and overall European worries of contagion, until a solution, or lack thereof, occurs in Europe. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.