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European Stocks: Heading For a Long-Term Recovery, Or Relapse?
Inside the new, April 2012 European Financial Forecast...
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By Nico Isaac
Fri, 30 Mar 2012 18:30:00 ET |
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Let's hear it for European equities. The major stock markets across the pond saw their best first-quarter winning streak since 2006. And while many experts are waiting to see how the markets deal with Europe's austerity measures -- the April 2012 European Financial Forecast lets the cat out the bag:
"European Stocks Have Already Signaled" their next move.
Take note, because this is what it feels like to watch history in the making.
- Elliott Wave Overview: What do Germany's DAX, France's CAC 40, and the EuroStoxx 50 all have in common? Well, one look at the opening chart of the April European Financial Forecast,and it's easy to see how all 3 indexes sport an identical wave structure from the July 2011 low: a zigzag. The best part about seeing a zigzag in a price chart -- let alone ALL three price charts of Europe's bellwethers -- is that it reveals what larger trend Europe is in.
- Market Momentum: We're not pulling any punches. We ditch the usual Relative Strength Index for the "preferred" momentum oscillator, the Jurik RSX. The heightened sensitivity of this indicator has proven its worth over time: It identified the two biggest stock market peaks of the last decade, in 2000 and 2007, AND the biggest bottoms in 2003 and 2009. That the latest RSX reading supports our interpretation of the waves says everything.
- Market Psychology: A strong rally in stocks has produced a strong rise in bullishness. At the same time, the VSTOXX has fallen to its lowest level in 15 months, indicating a growing complacency among options traders. Well, our chart of implied volatility in European equities since 2007 reveals how traders historically grow more hopeful about the future of stocks in the lead up to... one kind of move.
- Financial Sector Comeback? The mainstream experts say European banks are headed for a prosperous recovery thanks to LTRO's, long-term refinancing operations. But actions speak louder than words. When commercial banks grow more confident in one another's solvency, they show it by lending more AND saving less. Our chart of the European Central Banks Deposit Facility usage since 2008 reveals whether the institutions in charge are still hoarding for a rainy day.
- The Euro: Our update on the euro's next likely move is based on one simple Elliott wave rule: Three waves are corrective, while five-waves are impulsive. We apply this principle to the euro's rally from January to February to determine whether the currency's larger trend is up or down.
- Inflation. What Inflation? The August 2011 European Financial Forecast wrote: "The looming threat in Europe is not inflation, but deflation." And now we have a "mountain of evidence" to prove it; starting with a downward trajectory in Britain's Consumer Price Index, its Retail Price Index, and its broadest measure of money supply, M4. So, will the central banks be able to use monetary policy to reflate the credit bubble? Find out now.
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Tags: AEX, banks, CAC40, DAX, debt, diversification, Elliott wave, Elliott Wave trading, eu, euro, euro stoxx 50, europe, european central bank, European debt crisis, european markets, European Union (EU), eurozone, FTSE, Greek debt, inflation, Swiss Market Index (SMI)