Europe Breaking Bad As Volatility Explodes
Breaking bad
SX5E has broken decisively below the 100-day moving average, printing another large down candle today. Momentum is very weak. Note the ultra-long trend line slightly lower, along with the 200-day moving average, both acting as short-term "magnets".
Source: LSEG Workspace
Oversold
SX5E is approaching a short-term trend line around current levels. RSI is also very oversold, but catching falling knives is not a strategy we like.
Source: LSEG Workspace
Aggressive reaction
European “VIX,” V2X, is exploding higher again today. Note that the short-term gap versus the SX5E has widened significantly. Investors are clearly stressed about European equity risk.
Source: LSEG Workspace
Sketchy Europe
Last time V2X traded here the VIX traded above 30. Go figure.
Source: LSEG Workspace
CTA projections
GS: "In Europe, we model significant supply in the DAX (10.7bn) and SX5E (3.5bn) over the next 5-d in a flat market".
Source: GS
Needs energy
Europe is the energy sucker. Chart shows SX5E vs oil (inverted). We are not suggesting SX5E must crash to close the gap, but it shows you clearly just how vulnerable Europe is.
Source: LSEG Workspace
Soggy euro
The soggy euro doesn’t like rising oil prices, let alone exploding oil prices. The chart shows oil versus the euro (inverted).
