The Milanese index struggled during the session on Thursday as we continue to consolidate just above the 15,000 level. We see this area as significant support, and if it does get broken down below, we could see a real rush of selling. Because of Europe falling into recession, Italy is one of the last places we think investing would be palatable for most traders.
With this in mind, we see the 15,000 level is simply a barrier. This barrier needs to be overcome, and as long as the highs keep getting lower, it does look like we are building up pressure to break down. On a break down below the 15,000 level, and especially if we can get a daily close below that number, we would become very bearish of this market in start selling aggressively. We think if this happens, 14,000 is calling as a target.
With recessionary forces all across the continent, it is hard to believe that people who are not willing to invest in Germany would be bothered to invest in Italy. The Italian economy is still weak, and there is a considerable amount of headwinds in front of the Italians presently. Because of this, we think that they are a second-tier economy in Europe at best, and would not be bothered to do anything but short their markets.
Alternately, something of course can happen and we could see support at this level again. However, we would need to see a break well above the 16,000 level in order to be convinced of the bullishness of this market. It is simply too difficult to believe in the solidity of this market as the rest of Europe falls apart. With this, we see rallies as an opportunity for us to sell from higher levels and make larger profits. Unless the Europeans suddenly find themselves fixing the debt issue, we don’t see a scenario where this market rises over the long term. We will simply pick off a few trades here and there to the downside in this market based upon short-term charts.