Related Topics
European Markets , Stocks

Here’s What the Relative Strength Index Reveals About the Euro Stoxx 600

A major global stock index performs this notable feat in “record time”

by Bob Stokes
Updated: December 29, 2020

You've probably heard the saying credited to the 18th-century nobleman Baron Rothschild: "The time to buy is when there's blood in the streets."

Put another way, stock markets the world over bottom when fear is running rampant.

Hence, it takes a lot of financial courage to invest at such times, but for those who do, the rewards can be life-changing.

However, here at the end of 2020, we have the opposite situation to fear in one of the world's major stock indexes.

Our December Global Market Perspective explains with this chart and commentary:


The Relative Strength Index (RSI) -- a momentum oscillator based on the speed of price changes -- went "from oversold to overbought in record time."... After [a big Elliott] wave down produced one of the most oversold conditions in stock market history, [the following] wave up generated an overbought condition that exceeded the February 19 high. The RSI vacillated during [the sideways to down wave that followed], while [the most recent wave up] pushed the RSI back above 20, which is its most overbought condition since early June.

Does this mean that the price of the Euro Stoxx 600 will plummet from here?

Perhaps -- but not necessarily. Meaning, stocks can remain overbought (or oversold) for a time.

A more precise way of ascertaining the next big move for the Euro Stoxx 600 is to study the index's Elliott wave structure.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott's highly specific rules reduce the number of valid alternatives to a minimum.

Find out what "Elliott's highly specific rules" suggest is next for the Euro Stoxx 600, as well as other major global stock indexes.

You can do so by reading our Global Market Perspective. Follow the link below to get started now.

Get a 2021 Grasp on the Asian-Pacific, Europe, the U.S. – Plus...

...all of the 50-plus markets covered in-depth by our monthly Global Market Perspective.

Today, our 25-plus analysts see a financial world filled with unprecedent risks -- yet, at the same time, opportunities abound.

The monthly Global Market Perspective was once reserved for only institutional investors. Now, its professional-level content is available to you.

You get updates on the red-hot cryptocurrencies plus global equities, rates, metals, energy, forex and much more -- 50+ of the world's most-watched markets in total.

Protect and prepare your portfolio.

Follow the link below to get started now.


Forget the Fed -- Watch the Waves

The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.

Why a U.S. Recession May Foil Economists’ Expectations

A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.

Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?

In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.