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Home > European Markets
European Stocks: Finally Catching a Break?
Elliott Wave International, European Financial Forecast, April 2008 (data through March 27):
Bottom Line: European stock indexes are rising from deeply oversold positions and should have little difficulty continuing up to their February highs.
As expected, European stock indexes rallied in April. However, May begins the “worst six months of the year” according to the Stock Trader’s Almanac. "Sell in May and go away, come back on St. Leger's Day," remember? They don’t say that for nothing. May and June rarely is a friendly time for stocks.
However, the notable uptick in the British FTSE 100 and the German DAX, Europe's two leading stock indexes, is encouraging. In March, they both rallied above their January 2008 lows, and in April they "cemented" the gains by staying above those support levels.
There have also been other important technical developments in European stocks over the past few weeks. And the latest, May issue of Elliott Wave International's European Financial Forecast tells you about them in detail, explaining what each one means for the trend:
- Pattern Development:The DAX Index advanced impulsively – i.e., in five waves, a key Elliott wave sign – between 17 March and 7 April, and then corrected a portion of the advance.
- Falling Volatility: The DAX Volatility Index has been falling since the DAX Index bottomed in mid-March. When DAX was falling in late 2007, volatility went through the roof.
- Rising Schatz Yield: The Euro Schatz yield (Germany's 2-year bond) and the DAX Index have shown an unusual correlation lately.
- Improving Sentiment: The number of bearish market advisors increased as European stocks fell from their peak in 2007 – an important contrarian sign.
- Shallow and Brief Decline: Most European stock indexes have retraced a third of the gains they achieved between 2003 and 2007, but most have not retraced 50 percent. (Figure 5 inside the May EFF explains more).
- The DAX/Dow Ratio: The ratio peaked in December 2007 and remains in sharp decline (Figure 6 explains more).
- Negative Money Flow: The 100-month Money Flow Index continues to decline (See Figure 7 for explanation).
For most of these technical studies, the May European Financial Forecast references prior occasions when the same phenomena occurred, and then shows you – with charts – what trend the stock market is likely to take from here, based on the current and historical evidence.
The May issue of Elliott Wave International's European Financial Forecast is online now. Click here for details.
You will also find clear and concise forecasts for these European markets inside the May EFF:
- Germany's DAX stock index
- Britain's FTSE-100 and FTSE-250
- France's CAC40
- The Netherlands' AEX
- Switzerland's SMI
- Spain's IBEX 35
- Italy's S&P/MIB
- Dow Jones Euro Stoxx 50
- Russia's RTS
- Eastern Europe's CECE Overall Traded Index: Hungary, Poland, Czech Republic and Slovakia.
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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.
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