VGK Weekly and IEV Daily European Stocks Upward-Sloping Channel Overbot Negative Divergence

Germany and France Q2 GDP's are positive and the Eurozone appears to be moving out of the recession. Recent PMI's remain challenged, however, so it is questionable if this is actually the beginning of something longer term. The BOJ easy money this year flows into European stocks and bonds creating the faux stability. The charts above are reflective of many European indexes, the FTSE, Germany, etc..., so the same technical analysis holds for all of them.  Europe is selling off slightly today on the positive GDP news. The VGK weekly chart shows the steady up move in Europe over the last few years despite the ongoing economic troubles across the continent. Price is at the top rail of the channel just like the May top. The red lines show negative divergence and overbot conditions that should create a spank down moving forward. There is some short-term momo over the last three months so it is not unreasonable for price to top out sideways before rolling over.

The brown square shows traders tripping over each other to buy Europe over the last two months.  Lemming traders keep rotating from one sector or area to the next. The real estate and housing sector was the favorite flavor until it turned south. Ditto utilities until they rolled over. Financials and retail are faves by long traders but these sectors are rolling over now. The Dividend Stock Bubble continues to grow and top out. Next came the Japan trade with traders shorting the yen and longing the Nikkei via the DXJ. That fizzled so traders now run into Europe all declaring that a bottom is now in place. The beat goes on. Note that even the strongest inflow of volume in recent weeks could not surpass the selling volume from March in the 48-50 zone so it would be reasonable to see price move back to this area during the coming weeks and months.

The IEV daily chart red lines show negative divergence across the indicators, sans MACD line that would like to see some further buoyancy due to the upside momo. Price is now on an island above 42.5. Projection for Europe as a whole, and the parts, is to top out and roll over as the weeks and months progress despite numerous pundits, analysts and stock pickers telling folks to buy Europe with both hands. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.