August Correction Places European Stocks in Bearish Death Cross

Last month, it happened to the Dow Jones Industrial Average, then to an index of global non-U.S. stocks. Now, the ominous death cross pattern watched by market skeptics has formed in European equities.

Traders who track signals from charts say a death cross in the Stoxx Europe 600 Index -- created when the benchmark’s 50-day average price slipped below its 200-day average -- shows bearish sentiment is prevailing. The index has fallen 14 percent from a record in April.

“There are many markets which are struggling to clear key resistances on the rally from recent lows,” said Andy Dodd, a London-based technical analyst and sales trader with Louis Capital Markets. “In Europe, these would suggest that upside is limited and I see no reason to be long here.”

Some strategists disagree, remaining confident the index will rebound and post its best year since 2009. They forecast the Stoxx 600 will climb about 18 percent in 2015 from the Friday close, outperforming U.S. equities and recovering all ground lost after China devalued the yuan in August.

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