If EWI's European Financial Forecast editor were to publish a book, he would probably give it the same title that he gave to one of his charts in the new October issue: "Stock Diversification for Dummies."

 

It's easy to see that the title cuts both ways -- stock diversification is either a good thing and everyone should know how to do it, or it's a bad thing and only dummies would do it.

 

The chart, which breaks out the FTSE 350 index into its 10 components, tells you at a glance exactly which side of the argument is most persuasive.

 

You can see the chart, which covers two-thirds of a page, when you subscribe to this first-class forecasting service. Meanwhile, here's a taste of Editor Brian Whitmer's accompanying analysis:

 

Notice one more contortion of conventional logic shown on the chart. Time and again, we hear that “real assets” are the best friend of defensive investors in a down market. Yet, commodities plunged right along with stocks in September. So did the mining and industrial metals complexes, whose shares are down 40% and 53%, respectively. Observe that the oil and gas producers dropped, too. The dismal performance of these critical sectors supports EWI’s long-standing thesis that, as the deflationary storm intensifies, fewer and fewer places will provide shelter. [Excerpted from The European Financial Forecast, October 7, 2011]

 

Since Europe is ahead of the United States in dealing with economic woes and sovereign debt problems, that makes Whitmer's European analysis spot-on useful for investors in U.S. markets. You can be the first to know what's coming in Europe AND the U.S. by reading EWI's European Financial Forecast Service.

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We bring you technical analysis informed by the patterns of the Elliott Wave Principle. No one else writes about the wave patterns and what they mean as we do. That's because we are the originals, and our analysis has stayed original over the past 32 years. Read more about this new edition of The European Financial Forecast here.