Outlook SMI: The SMI continued its recovery from the 8570/ 80 support level and reached the 8840/50 resistance. The ratings for the SMI are still negative. However, a short-term upgrade to neutral is pending.

The short-term technical indicators stabilized in the last few trading sessions. The short-term price downtrend from mid- February is slowing and the corresponding momentum cycle bottomed recently. However, the new turnaround attempt is expected to continue after a potential 1-2 day halt (momentum reversal plunged to 8400) unless there is no sudden negative exogeneous impetus.

However, traders and short-term investors should take into account that the advance is a counterleg within an unstable medium-term environment.

Short-term resistance is at 8840/50, 8910 and 8960/80; supports are at 8780, 8740/5 and 8670/90.

The med.-term technical indicators look still weak. The trend is topping after its remarkable upmove from last August and the momentum cycle established a new downmove end-February/ early March (reversal level at 9275; up from 9125). Its pressure is expectect to continue into Q2 2007.

The trend- and momentum readings for the single SPI stocks underline the cautious view. The majority of the stocks are positioned below the medium-term price trends and more than 70%of the stocks are positioned in the dedclining and terminating momentum cycles. Given this constellation the medium-term downside risks remain in force. A new cycle bottom is not expected before end-April/mid-May.

The long-term cycle is slighlty falling again after a period of ambiguity in January and early February. A development which would intensify temporarily if the mediumterm momentum pressure continues.

The conclusions are unchanged from last week. Given this constellation investors should shift into stocks with solid relative uptrends (relative to SPI ) and watch the adjusted stop level for the few stocks which are still on the recommendation list. Medium-term key supports are at 8570/80; 8480/520, 8320, 8240 and 8000. Medium-term key resistance is at 9150/200.

 

source: CS