Travelling Technicals with Global Indices: FTSE MIB

If you've been following Travelling Technical you'd have noticed the considerable amount of coverage I've done on European indices instead of paying attention to the overall gauge of equities in Europe with the Euro Stoxx index. I've have purposely done it to draw the reader's attention to the country specific stock exchange to piece together the overall picture so as to fit the pieces together to form a general idea of which countries play a significant role in the region. 

Today's analysis is no different with the FTSE MIB of Italy representing the 40 largest stocks listed on the Italian Stock Exchange (or otherwise known as the Borsa Italiana). Once a formidable empire, Italy has evolved into a nation that still prides itself in every aspect of their living. Whether it be sport, tourism, manufacturing or even sports car, there's a certain allure you get when consuming products and services that associate themselves with Italy. 

Boasting the third largest economy in the EU after Germany and France, the country still plays an important role in contributing to World GDP coming in the Top 20 biggest economies in the world. But as is the case with most European nations they've caught themselves in the debt trap however they are large enough to consolidate themselves and save the foundations that's built their economy. 

Politics can be entertaining at times with various politicians scandal riddled lives splashed all over the front pages of the newspapers but again the arrogant confidence portrayed by its citizens always finds a way to avoid a calamitous outbreak of chaos that would threaten to embarrass national pride. 

Let's get down to the chart; 

Monthly

Investors of Italian equities haven't had much to brag about regarding returns with the index being stuck in a stagnate range since the lows of the Financial Crisis. There was an attempt to break through the highs of a past rally that hadn't quite leveled enough ground against the dramatic drop since 2008/09. 

I spotted a unique technical shape having formed on the RSI, with the pattern resembling that of a double top break below 50. That occurred after the price rejection at the resistance level suggesting that the bulls have lost power in their fight to break free from this range bound state. 

Weekly

Identifying with the previous paragraph's analysis regarding the bulls loss of momentum power to break through the all important resistance, we are able to dissect the price action further on the weekly and pin precisely where the trouble started and whether there might be any hope for this index. The strong uptrend starting 2012 was broken during the period where volatility had swung into markets but instead of occurring during August 2015 it happened around December. 

This probably had been impacted by the markets change of sentiment when it came to Europe and the economic prospects given the further extremities of negative interest rate policies. The key here will be the region of 18 000 where the line of polarity lies. If price is unable to capture the upper levels then expect to see more downside in the coming months. 

For now it seems as if the drastic drop shook enough weak and steady hands out the market and the market has entered a phase of consolidation. Again 18 000 will be key for the sellers to hold back the buyers.