European stocks will fall further after breaching a level that held since European Central Bank President Mario Draghi unveiled an unlimited bond-buying program, according to a technical analyst at Commerzbank AG.
Draghi announced on Sept. 6 a plan to purchase debt in an attempt to regain control of interest rates in the euro area. The Stoxx Europe 600 Index closed at 265.49 on Sept. 5. The gauge slid below that level for the first time on Nov. 16. It had rallied as high as 276.18 on Oct. 18.
“We fell below the September level, which in my point of view is a signal that the consolidation which began back in September is going to expand both in time and in space and the next really good support is in the area of the 200-day moving average, 260 to 261,” Petra Grafin Von Kerssenbrock, a technical analyst at Commerzbank, said in a telephone interview.
The Stoxx 600 has dropped 4.3 percent since the re-election of President Barack Obama on Nov. 6 as traders turned their focus to the so-called fiscal cliff that will trigger $607 billion of tax increases and spending cuts next year, sending the U.S. into recession, if Congress doesn’t reach a compromise.
The index dropped 1 percent to 262.86 at the close of trading on Nov. 16, for a 2.7 percent weekly decline, the biggest since June.
In technical analysis, investors and analysts study price graphs to predict changes in a security, commodity, currency or index.