David Fuller's view I first warned that the S&P 500 and other leading stock market indices were in the latter stages of this rally prior to the next corrective phase on Friday 14th September. Subsequently, many indices have lost upward momentum and more recently we have begun to see some upside failures among relative strength standouts such as the ASEAN indices reviewed yesterday.


Europe's performance obviously remains important, not least in terms of global sentiment given all the talk of 'euro break-up', although this was never the Fullermoney view. Fortunately, Mario Draghi's leadership at the ECB has quieted the more extreme fears and this was reflected by a strong rebound in European stock market indices commencing in July. Nevertheless, the difficulties of austerity measures during a recession remain and public demonstrations of discontent are numerous in some of the Southern European countries. This is leading to a partial retracement of Europe's stock market rebounds.

The Euro STOXX Bank Index surged between late August and early September before losing upside momentum, evidenced by the larger pullback. This month's partial recovery is being retraced and a close above 108 is now required to check this corrective phase. The Euro STOXX 50 Index has a very similar pattern and would now need to close above 2540 to indicate that demand was regaining the upper hand. Germany's DAX edged beneath its late September reaction low today and needs an upward dynamic to offset somewhat lower scope, as does Spain's IBEX. Italy's MIB requires a close above 16,000 to confirm recent support near 15,000. Significantly, there has been no surge in Italian and Spanish 10-year bond yields recently although they have both lost downward momentum in recent weeks.