About a month ago I warned about an imminent reversal in European Equities (measured as EUROSTOXX 50 Index). My strong advice was to reduse long exposure to a minimum, or better liquidate long totally.

Now we see some ominous signs that reversal is indeed happened. Notice engulfing weekly bar. 



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According to a recent Bank of America Fund Manager Survey, Europe is now the top pick of managers for the coming twelve months. A record 63 percent of fund managers are allocating their assets toward Europe, up from just 18 percent earlier this year. More than 80 percent see the Euro-area economy strengthening this year, boosted by export growth tied to a 25% plunge in the euro amid fresh quantitative easing by the European Central Bank. “It is as if there is not a single bear left,” said the bank’s European strategist. He followed up with, “Bullishness towards European stocks has reached unchartered territory”.

The best time to liquidate long positions in European stocks is NOW. Still, it's too early to start a bear raid.

 

Odds are DAX-June13 has reversed to the downside and if so — immediate selling should follow. I remain bearish, lowering my risk point to 8034.                                                         The clearest perspective for European indicies is seen on Eurostoxx50 chart:
 

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