From UK to Germany to France: A Pan-European View

Dana: Hi, I'm Dana Weeks, and I'm here today with Brian Whitmer, editor of Elliott Wave International's European Financial Forecast, and contributes to the Monthly Global Market Perspective. Welcome back, Brian.

Brian:Hi Dana, nice to be here again.

Dana: So Brian, your May EFF issue has quite the variety of topics, and you open with a long term chart, even going back as far as the end of World War II, of the UK Financial Times All-Share Index, why did you emphasize this?

Brian: Yeah, every now and then I really just like to step back, take a look at the long-term charts, I especially like to do that when I think we're at an interesting juncture near term, and so I did that this month. What I like to do, and I have a chart here, I like to just strip it of all the wave labels from previous labelings, and just kind of take a fresh look at the chart. And that's what we have here, we have the All-Shares back through the 1940's. I know from history this is a major low in World War II. If we go back even further, this ended a long-term contracting triangle back here, and we've got this nice impulsive advance to start with. I've labeled some of the important junctures, the April '72 high is right here, the November '74 low, and I've labeled the '87 crash right here. So there's a couple things that kinda stand out on this chart. First of all, this entire rally here, that's a really nice impulsive wave. What that tells me is that this high in '72 is probably a wave one, right. The '74 low, that makes that a wave two, and now we've got this whole structure up from the 1970's, and there's varying ways to count this. The way I'm counting it is a one, two here, the '87 crash is a three, four, and then we've got a fifth wave back up here at the '99, 2000 high. And if that's the case, that would then make that a wave three, and we can apply some of Elliott's rules and guidelines to this wave. For instance, channeling. If we connect the highs of wave one and three, draw a parallel trend channel off of the wave two low, that should give us an approximation of wave four, and what's really interesting then is this entire pattern since the '99, 2000 high, came back and almost met that channel. And what that would imply is that this low in '09 is a fourth wave. So the important thing here is that prices are resting right now on this lower channel boundary. This '09 low, that could very well be a fourth wave. If it is, stocks are very similar in the UK to the S&P or the DOW, where we're now rising in a fifth wave. So if stocks head down from here and they break this trend channel, this would make this entire rally in A B, and we're looking for wave C down. So really the point to get across here is that the upside is limited, and it's limited under the preferred count, or the top alternate count.

Dana: And Brian, do you see a similar trajectory in Germany and France, big picture?