Has Europe’s Sovereign Debt Crisis Finally Hit Rock Bottom?

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Has Europe’s Sovereign Debt Crisis Finally Hit Rock Bottom?
Inside the May 2012 European Financial Forecast...

By Nico Isaac
Fri, 04 May 2012 18:00:00 ET

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It’s been two years since the sovereign debt crisis crashed onto the European shores. And, despite 1-plus trillion euros in emergency bailout loans, the region’s economy has -- as my British friends would say -- “gone pear-shaped.”

Greece and Portugal are bankrupt.
Italy and Spain are de facto bankrupt.
And the British economy just suffered its first, double-dip recession since the 1970s.

So, is this what rock bottom feels like? Well, the May 2012 European Financial Forecast has no intention of burying the lead:

“The biggest financial, social, and political event in at least a century” is approaching.

In the May 2012 European Financial Forecast:

Stock Markets: The March 2012 European Financial Forecast issued this warning: “The set-up for a reversal lies ahead.” From their respective mid-March highs, Europe’s main stock indexes fell 7% to 15%. Now, the May Forecast’s striking, page-length chart of Europe's 6 major stock markets reveals one commonality: They all sport the same number of waves from their March highs. To an Elliottician, this means the near-term picture couldn’t be clearer.

Market Psychology: Get rich or BUY trying? Fund managers and financial strategists are back on board the “Buy-The-Dip” bandwagon. So, is this the way to go? Well, in our experience, there is one point along the progression of an Elliott wave pattern when “Traders view every sell off as an opportunity to get in.” Whether that point is at its beginning, middle, or end right now might surprise you.

Spain -- Central Bank FAIL Out: First, you borrow record amounts of low-interest loans from the European Central Bank. Then -- in theory -- you sit back and watch the signs of recovery roll in. The May European Financial Forecast shows you irrefutable proof that reality is drastically different via these 3 charts:

The Proportion of non-performing Spanish loans since 2000
Spain’s 10-year bond yields since 2002
The stock price of Spain’s largest bank Banco Santander vs. 5-Year Credit Default Swaps since 2006

The Euro. Our May European Financial Forecast chart of the euro has plenty to offer:

A clear Elliott wave structure of the decline since the May 2011 peak
A finely-tuned make-or-break price level: Staying above it would confirm a near-term rise, while falling beneath would suggest a “more protracted selloff.”
A parallel trend channel that has contained the euro’s price swings for 4 years.

“Catch That Train!” After a “5-year downpour of pounds and euros into the European economy,” it’s no wonder the usual pundits have nailed a mug shot of INFLATION to their WANTED wall. BUT, as the May European Financial Forecast explains, the profile befits a different enemy: deflation. Here, you see a chart of Germany’s CPI Index since 2003 that looks very similar to British CPI last month.

Voting Poll-Arity: The political scene in Europe has become more raucous than a bar-room brawl. The weeks leading up to the upcoming elections in Greece and France have seen the rise of radicals and fringe candidates. Well, as the May European Financial Forecast reveals, the growing “political polarity” is a known give-away of a bear-market social mood. The question is -- will the 2-year incumbent Grizzly will be elected for another term? Find out now.

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Tags: AEX, Bank of England, CAC40, DAX, diversification, Elliott wave, Elliott Wave trading, eu, euro, euro stoxx 50, euro/USD exchange rate, europe, european central bank, European debt crisis, european markets, European Union (EU), eurozone, FTSE, Swiss Market Index (SMI), technical analysis

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