If you didn't know any better, you might think the recent news items regarding the European stock markets were being written from inside a loony bin. Case in point, the following slew of Euro-related headlines:
- "European stocks declined as Greek talks...continued. " (BusinessWeek)
-- VERSUS --
- "European Stocks Rise Amid Greek Debt Talks" (SF Chronicle)
- AND -- "European Stocks Unable To Build On Recent Gains... Unnerved by Greece" (Associated Press)
-- VERSUS --
- "European Stocks Rise Despite Concerns About Greece." (KSBW)
The problem is not these news reports. The problem is the flawed "news-moves-the-markets" formula for which they are written.
Here, in his 2004 book "Prechter's Perspective," EWI President Robert Prechter provided the following insight into the main falsehood of "fundamental" analysis of the financial markets:
“News is irrelevant to trends. Sometimes it appears to fit a day’s trading range so perfectly that everyone ‘knows’ what the cause of the day’s move was. Other times, the market does the opposite of what everyone would have expected. This unreliability proves that news is not determining the trend... The only thing that never changes is the dynamics of social psychology," [which unfolds in Elliott wave patterns on price charts.]
AND:
"A fox only appears crazy if you expect it to behave like a chicken. Similarly, the market only appears ‘crazy’ if you expect it to behave according to the laws of physics rather than those of sociology, upon which it is actually built."
The fact is, the "animal" behind the recent performance in European shares is neither a fox nor a chicken. It's an Elliott wave structure.
Right now, our
European Stocks Specialty Service shows subscribers a compelling chart of the bellwether EuroStoxx 50 index. I've reprinted said chart below and added a detailed box to show how our analysis incorporates 3 key steps for determining the larger trend at hand. (Elliott wave labels have been removed for this publication.)
1. Count the waves: The Elliott Wave Principle recognizes two modes of wave progression: impulses (5 waves) and corrections (3 waves, usually).
2. Relative Strength Index: You can often enhance your Elliott wave analysis with a momentum indicator, such as RSI. When prices diverge with RSI, that signals a weakening trend.
3. Support and resistence levels: Fibonacci-derived price targets allow our analysts to identify certain price areas as key "ceilings" or "floors" to a wave count's viability. A decisive break of these levels either supports or negates the Elliott wave forecast.
EWI’s European Stocks Specialty Service updates you to the latest Elliott wave developments in the DAX, FTSE-100, SMI and Euro Stoxx 50.
You get expert forecasts as the markets trade to help you stay ahead of intraday market moves. Each update includes insightful analysis, key price levels and targets that can help give you the objective edge that every trader needs.