European charts are in slightly better shape than their North American counterparts.

Germany (DAX)

The trend channel is holding up as strong economic numbers are driving the DAX. It appears as though we may get a rally started from last weeks sell off and depending on the strength of the rally it will determine whether the DAX moves to new highs or pulls back with other global markets.

The longer-term charts sit at an important juncture. Since rising out of the March 2009 bottom the DAX has consolidated its gains while attempting to break above resistance levels. Monthly and weekly resistance levels need to be taken out or the DAX risks falling prey to global fears of a slowdown.

France (CAC)

The short-term charts show that while the CAC did take part in the terrible selloff last week the index sits at the bottom of a trading channel with the 50 day moving average providing support. The beginning of next week will be crucial to the health of the CAC as a selloff would take the index below support and send a clear sell signal to the market while a move up may keep the trend channel intact for the time being.

The longer-term charts of the CAC show a breakdown as the index appears to be having difficulties breaking through resistance levels. If the CAC cannot break the 50 week moving average and hold the short-term trend channel we are set for a move lower.

UK (FTSE)

The short-term charts show a breakdown in sympathy with the US last week. On a slightly more positive note the FTSE was able to squeak out some slight gains on Thursday and Friday. The key will be how the FTSE reacts during next week and if a strong rally can take hold.

The FTSE appears to be having difficulty breaking through the 50 week moving average. On the weekly charts a head and shoulders top formation is very clear with the latter half of the right shoulder yet to being completed. The head and shoulders formation is much more clear than the CAC chart and a downturn may take the index lower than most people expect.

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