Eoin Treacy's view The Eurozone's debt troubles have just about everyone on tenterhooks as first one country then another reveals outsized debt burdens and a declining ability to pay. The Euro has fallen considerably against other major currencies and wide disparities have emerged between the valuations of ‘core' versus ‘peripheral' sovereign bonds. Against this background, the outlook for stock market performance has been heavily influenced by concerns centring on economic slowdown and the potential for a breakup of the currency union.

The role of high oil prices in the region's economic woes is less well publicised. Brent crude redenominated in Euro hit a new all-time peak in March following a consistent uptrend over the previous three years. It has since pulled back sharply; breaking its progression of higher major reaction lows in the course of its 25% decline to date. While oversold in the very short-term a sustained move above €85 would be required to begin to question the consistency of the emerging downtrend.

While oil prices have dropped quickly, the Euro denominated Continuous Commodity Index held up better than its US Dollar equivalent. However, the clear trend is downwards and a break in the progression of lower rally highs, currently near 450 would be required to question that view.

Sticky inflationary pressure in the Eurozone deterred the ECB from more aggressive policy action under the reins of Jean Claude Trichet. With commodity prices now falling rather aggressively, this should help to combat opposition from inflation hawks to more substantive stimulus measures. Against this background and considering the likelihood of Spain tapping the soon to be active European Stability Mechanism, the potential for an additional liquidity infusion is rising. In addition valuations have improved by a significant margin over the last few months to the extent that value investors are beginning to become interested. It would appear to be a favourable moment to address the prospects for some of the Eurozone's stock markets.

The German DAX Index (P/E13.49, DY 4.19%) found at least short-term support in the region of 6000 three weeks ago and has rallied to test the three-month progression of lower rally highs. A sustained move above 6500 would suggest more than a temporary return to demand dominance.

The French CAC Index (P/E 10.18, DY 4.62%) has been ranging with a mild upward bias since October. It found support in the region of 3000 in late May and will need to hold above 2900 if the benefit of the doubt is to continue to be given to unwind of the oversold condition. The Belgian BEL-20 Index (P/E 19.45, DY 4.78%), the Dutch AEX Index (P/E 10.83, DY 4%) and the Austrian ATX Index (P/E 15.4, DY 2.67%) share similar patterns.

The Italian FTSE/MIB Index (P/E N/A, DY 4.34%) retested the 2009 low three weeks ago and found at least near-term support. It is currently unwinding the short-term oversold condition and a sustained move below 13,000 would be required to check potential for a further unwind of the oversold condition.

Following a steep decline, the Spanish IBEX Index (P/E 12.15, DY 5.7%) found at least short-term support at 6000 three weeks ago, posting an upside key reversal at the low. It has now rallied to break the four-month progression of lower rally highs and potential for additional upside can probably be given the benefit of the doubt provided it holds above 6000 on the next significant pullback.

The Finnish HEX Index (P/E 25.3, DY 5.54%) has at least paused in the region of the 2011 lows and a sustained move below 4800 will be required to question potential for a further unwind of the oversold condition.

The Estonian Index (P/E N/A, DY 2.60%) found support near 500 in September and has been ranging above the subsequent base since February. A sustained move back below 600 would be required to question potential for some additional upside.

The Greek ASE Index (P/E N/A, DY 3.41%) lost downward momentum from late May and has rallied impressively this month; at least partially closing the oversold condition relative to the 200-day MA. A sustained move back above the MA will be required to signal a return to demand dominance beyond the short term. The Portuguese PSI20 Index (P/E 125.21, DY 6.39%) and Cypriot Index (P/E N/A, DY 1.09%) have similar patterns.

The Irish ISEQ (P/E 20.51, DY 1.79%) retested the upper side of its more than three-year base in March and pulled back to the psychological 3000 level where it has at least paused. A sustained move below that level would be required to check current scope for some additional higher to lateral ranging.

While Switzerland is not in the Eurozone, its currency is now pegged to the Euro. The SMI Index (P/E 15.94, DY 1.79%)has held a progression of higher reaction lows since last August and the recent low 5700 represents the most recent punctuation in that progression. A sustained move below it would be required to check current scope for some additional higher to lateral ranging.

In conclusion while sentiment towards the Eurozone remains decidedly ambivalent, valuations have improved considerably and the vast majority of Eurozone stock markets are in the process of unwinding short-term oversold conditions. They will need to hold above their June lows on a subsequent pullback and subsequently rally to fresh recovery highs to suggest a return to demand dominance beyond the short-term.