Can Portugal Stocks Spark One Last Hurrah For The PIIGS?
The topic of our Chart Of The Day on July 10 was Portugal's PSI 20 Index. It was all the rage in the morning headlines as it was down some 4% on the nation's banking concerns and global markets were selling off in sympathy. What we wanted to show with our chart was the fact that Portugal's issues had been building for some time. Indeed, the PSI 20 was already down some 20% before that day, with scant coverage. Additionally, as we indicated on our chart, the index was already nearing a major level of support (potentially). We should not be surprised, given the media hoopla, that the market essentially put in a bottom on that day, rallying as much as 8% over the last few weeks.
Now it is retesting those lows. This retest could be the moment of truth for the PSI 20, and possibly for the PIIGS countries, in general. The PSI 20 closed below the previous low today and has slightly undercut the key Fibonacci Retracement levels we had identified as support. However, thanks to an intraday bounce it did manage to close on the uptrend line from the 2012 low. A successful retest could provide for at least one more short or intermediate-term rally in the PSI 20. This could provide a catalyst for the other PIIGS markets to rally as well from similarly vulnerable conditions.
If the retest is not successful and this level is broken, it could spell the end of the PIIGS post-2012 rally.
