The Milanese index rose during the session on Wednesday, as it bounced off of the 15,000 level. This was an obvious support zone, so the bounce certainly wasn’t overly surprising. However, we saw a serious selloff of the “risk year assets” at the end of the US session, which of course would have been well after most European traders went home.
With this in mind, we aren’t as confident of this bullish candle as we would be under normal circumstances. The 15,000 level needs to hold in order to continue the sideways grind we have seen in this market in our opinion. However, it should be noted that the highs recently have been getting lower, and we do suspect that the Italians will not react well to the idea of the US going over the fiscal cliff. With the various political players in the United States seemingly at a standstill, we could see a real risk off type of day. However, we break the top of the candle from the Wednesday session; we fully believe that 15,800 is obtainable. On a break of the lows though, we would become aggressively short of this market and aim for 14,000.