by Dana Lyons
While U.S. indices once again plumb their post-correction lows, it is important to remember that there is a whole world of potential investments out there. In other words, you don’t have to just trade the S&P 500. Some global stock indices are holding up much better than the U.S. currently. And thanks in part to a weakening Euro, many of those countries reside in Europe, including our “Mystery Chart Of The Day” on Twitter and StockTwits: Italy.
Following a mammoth 2-year bear market into early 2009, Italy’s benchmark FTSE MIB Stock Index doubled itself into October of that year, peaking just north of the 24,000 level. It has not been higher since. It has made a few runs at that level over the past 9 years, including a few times in 2015 as well as this past January. But it just never could get over that hump. It may be on the verge of doing so now, however.
While the MIB has not decisively broken those October 2009 highs, it has in recent days closed above the slightly down-sloping trendline connecting the peaks of the past 10 years. What’s more is the fact that the chart pattern since 2009 could be interpreted as a large (and bullish) cup-&-handle formation. Furthermore, the pattern post-2015 could also be interpreted as such. Obviously, if those interpretations are correct, it could mean major positive ramifications for Italian stocks in the near-term.
But aren’t the PIIGS in dire shape, financially, you might ask? And isn’t the recent rally all a result of the falling Euro? The answer to both of those questions may be affirmative. But you know what, our attitude is it doesn’t matter. That’s because while the rationale may be a mystery, prices would suggest that Italy is poised for a major breakout and potentially substantial up-leg.