In early 2008, European stocks, especially those in Eastern Europe, were investors' darlings, "shelters from the storm." Well, try finding someone who thinks so now: Those markets fell even harder than the Dow. Russia's RTS stock index, for example, at its recent low lost almost 80% in from its May 2008 peak, in just nine months!
Wait, aren't the world's stock markets supposed to follow the DJIA? Clearly, that's not always the case. That's why, if you invest overseas, you need more than the Dow to succeed with your portfolio – you also need to analyze Europe's bourses one-by-one.
EWI's European Financial Forecast Service does just that. A month ago, on January 30, the February issue of monthly European Financial Forecast (EFF) issued the following warning to subscribers:
…the corrective rally that began last December is over. The DJ EuroStoxx 50, Italy’s S&P/MIB index and Paris’ CAC 40 have already penetrated their respective 2008 lows; other European markets should soon follow suit. Expect some downside fireworks as the still-large number of bull market believers capitulate this month or next.
Our expectation for “downside fireworks" was sufficiently met last month. From their mid-month peaks, the FTSE shed nearly 10%, the CAC 40 lost almost 13%, and the DAX dropped 16%.
That's in just one month. And, says the EFF editor Brian Whitmer in the March issue, judging by the "incomplete structure" of Elliott wave patterns in Europe's major bourses, they can go lower:
How much lower? The Wave Principle’s rules are clear: “Corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.” (See Elliott Wave Principle, p. 66.)
What does that translate into in terms of price points? You can see the long-term target for the British FTSE 100 index on p. 1 of the March European Financial Forecast. Read it online now, risk-free for 30 days.
- Germany's DAX stock index
- Britain's FTSE-100
- France's CAC40
- Eurozone's Dow Jones Euro Stoxx 50
- The Netherlands' AEX
- Switzerland's SMI
- Spain's IBEX 35
- Italy's S&P/MIB
- Belgium's BEL20
- Austria's ATX
- Sweden's OMX
- Norway's OBX
- Greece's FTSE ASE
- Russia's RTS
- Eastern Europe's CECE Overall Traded Index: Hungary, Poland, Czech Republic.