Will Europe's Economic Wildfire Finally Be Contained?

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Will Europe's Economic Wildfire Finally Be Contained?
Inside our new, July 2012 European Financial Forecast...

By Nico Isaac
Fri, 29 Jun 2012 18:00:00 ET

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"It won't stay in one place! Shifting winds make it difficult to contain the blaze as it continues to spread." -- Recent onsite coverage of the worst wildfires in Colorado history.
"It's a nightmare." "The crisis just continues to spread." A recent news account describes the ongoing debt woes in Europe.

The raging inferno of soaring bond yields and plunging stock markets has been spreading across Europe, jumping from Greece to Portugal to Spain to Italy.

But according to the mainstream experts, there is one way to snuff out the flames: fly rescue planes over the blaze and dump emergency lending, low interest rates, and monetary policy from the skies above.

And from the ashes, new growth will emerge.

So, are they right?

Well, the brand-new July 2012 European Financial Forecast suits up and goes deep into the heart of the beast to see whether the economic wildfire will finally be contained.

Inside the July 2012 European Financial Forecast (EFF):

Greece: Keep Politics Out Of It: Long before the final vote was announced for Greece's June 17 Parliamentary election -- our European Short Term Update foresaw a June boom in the country's bellwether stock index, the Athens Stock Exchange (ASE). The June 8 Short Term Update wrote:

"The ASE is poised for the best rally in months... one that will inflict significant pain on bears."

June 11 kicked off a 9-day long winning streak that took the ASE 25% higher. Chart 1 of the July EFF makes a very clear point: The larger trend in the ASE does NOT depend on which party is in Parliament; but rather, on which Elliott wave pattern is in the price chart.

A Deja...VIEW of European Stocks: The mega-pixel chart on page 3 goes big. It shows how the wave sequence in London's FTSE 100 from its 2011 high is a "mirror image" of a pattern seen in the recent past. This analogous wave structure, combined with a "compelling technical feature," places the bourse at the "forefront" of the most powerful move known to Elliotticians. What's more, this move will likely take all major European markets with it.

A Short-Term View of Stocks: The July EFF shows you a 3-paneled daily price chart of the DAX, the CAC 40, and the EuroStoxx. Then, it "zooms in on the near-term wave structure." The result: There are 2 possible interpretations for recent price action. Both labelings, however, lead to "the same conclusion" about the next big across-the-board move.

French Banks: Play Again? In the bull market years of 2004 and 2006, France's financial giants went around like Pac-Man, mouth open wide, consuming smaller "Pac" pellets to gain strength and power. Post-bust, however, the acquire-and-go-higher strategy has backfired as the bundled debt load becomes a "veritable leg iron"

Now, the July EFF's chart plots the stock price of France's 2-biggest banks and reveals whether it's Game Over time -- or if there will, indeed, be another bullish turn to win it all back.

Will the Euro Survive? Countless euro summits, reams and reams of data, and hours and hours of media airtime later -- and the experts still have no clear answer. Well, the July EFF has the 1 chart that says it all: It shows a steady 5-year long positive correlation between --

Investor confidence, EuroStoxx rallies, and EUR strength, and
Investor fear, EuroStoxx declines, and EUR weakness

Meaning: The one precondition for a pro-euro outcome is an uptrend social mood, as reflected in a 5-wave move up of larger degree in the euro's price chart. The July EFF reveals if such a pattern is at hand.

Eurozone Recession Dodged? In the 1st-quarter of 2012, the 17 nation eurozone officially escaped recession as per the garden-variety measure: 2 successive quarters of negative growth. But, what do the unofficial measures say?

Here, the July EFF presents one of the most powerful, real-time-record of actual economic conditions across the Continent: Eurozone GDP and Eurozone Business Activity since 1996. One look at the direction of both gauges puts to rest any doubts.

Three Cheers for UK's Falling Prices: Since May, every major inflation checkpoint has gone down:

UK consumer prices
Year-over-year pace of consumer prices
Factory output prices
World food prices

So, is this a "step in the right direction" toward the "healthy" 2% inflation target? Well, the July EFF makes an invaluable point: Lower prices ARE good... so long as they are met with higher consumer spending. Our chart of household savings since 1985 reveals whether the necessary balance is in place.

Tap into these insights now via a 30-day RISK-FREE trial subscription to The European Financial Forecast Service. Subscribe today, and you'll also get instant access to the still-valuable May and June 2012 European Financial Forecast publications.

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Tags: AEX, Bank of England, CAC40, central banks, DAX, debt crisis, debt downgrade, diversification, Elliott wave, eu, euro, euro stoxx 50, euro/USD exchange rate, europe, european central bank, European debt crisis, european markets, European Union (EU), eurozone, FTSE, inflation, International Monetary Fund (IMF), Swiss Market Index (SMI)

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