EuroStoxx 50 has staged a temporary recovery from oversold conditions, up 3.95% on the week, after finding support along its long-term 200-day price average.  

Nevertheless, at the time of writing, bears are showing signs of renewed weakness, favouring a test of medium-term support, near 3640.

A weekly close below this area will add further weight to the top formation (built below 3900), thereby offering further retracement into next potential support, near 3200 (winter 2005 trough levels). 

Our Investors Intelligence breadth indicators are unwinding from quite oversold territory.

Looking at the faster 10-week moving average chart (which gauges the short-term momentum of each DJSTOXX 50 stock constituent), shows the indicator unwinding after falling to extreme oversold levels, not last seen since 2003.

In stark contrast, the bullish% breadth study (which measures the number of stock losing their Point & Figure uptrends), has broken below its 2005 support floor, near 40%. We remind our readers that bullish% successfully warned of medium-term divergence before the stock market correction and continues to hold a negative bias.

For more reports and detailed information please visit our technical analysis section