The Euro Stoxx 50 cash index traded higher on Monday, breaking above the peak of Dec. 28, at around 4325. The move confirmed a forthcoming higher high, and thereby, the recovery started on Dec. 20. Thus, we will consider the near-term picture to be positive with that in mind.
In our view, the bulls could soon target the 4370 barrier, marked by the high of Nov. 22, which, if also broken, could pave the way towards the record high of Nov. 18, at 4415. Now, suppose market participants do not stop there and break that zone. In that case, the index will enter uncharted territory, with the next area to consider as a resistance perhaps being the psychological zone of 4500.
Shifting attention to our short-term oscillators, we see that the RSI rebounded again and crossed above its 70 line, while the MACD, although positive, has just crossed above its trigger line. Both indicators detect strong upside speed and corroborate the view for further advances in this index.
To abandon the bullish case for a while and start examining whether we entered a decent corrective phase, we would like to see a dip below 4235, the low of Dec. 27. The bears could then take charge for a while and perhaps pave the way towards the low of Dec. 22, at 4166, or the 4135 barrier, marked by the low of Dec. 14.
If they are not willing to stop there either, we could see them diving towards the upside support line drawn from the low of May 13 or the 4055 zone, near the low of Dec. 20.