Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

European Stock Markets Look Downright Scary

Stock-Markets / European Stock Markets Aug 09, 2014 - 12:12 PM GMT

By: Sy_Harding

Stock-Markets

Here’s the situation.

The economy of the 18-nation European Union is about the same size as that of the U.S., with roughly equal impacts on each other and on global growth. Germany, France, and the U.K. are the largest economies in the EU, and the fourth, fifth, and sixth largest economies in the world.


The stock markets of those major European economies have been tracking in tandem with the U.S. market for years, showing similar resilience, making new highs together.

They are still moving somewhat in tandem with each other, being in short-term pullbacks together.

However, while the S&P 500 topped out into its pullback just two weeks ago, and is down less than 4%, European markets topped out two months ago, and on average are already down about twice as much, and still declining. That has them still within the confines of a brief, normal, and overdue 10% correction.

However, in their pullbacks the major markets of Europe have broken beneath not just short-term and intermediate-term support levels, as has the U.S. market, but beneath their long-term 200-day (40-week) moving averages.

That is potentially ominous based on what usually happened in the past after similar breakdowns of long-term support.

The breakdown is blamed primarily on investors being nervous about the situation between Russia and Ukraine.

Let’s hope so, as reports on Friday were that Russia announced (for the second or third time) that it will pull its troops back from Ukraine’s border, and once again that provides hope that the situation is cooling off.

However, the real catalyst for the market sell-off in Europe is more likely that European economies have become seriously problematic again, which is potentially a longer-term problem.

For instance, first quarter GDP growth for the 18-nation euro-zone was barely positive at 0.2%, and Germany’s growth of 0.8% was the primary driver of that.

Reports are beginning to come out on second quarter growth, and this week’s report was that Italy’s economy slid back into recession in the second quarter. And in the last few days, it was reported that factory orders in Germany plunged 3.2% in June, after declining 1.6% in May. Indicating the weakness in the rest of the EU, Germany’s incoming orders from other euro-zone countries plunged 10.4%. Additionally, industrial production in Germany declined 0.5% in June, widely missing the consensus forecast of a gain of 0.3%.

Those dismal reports from Germany raise concerns that its economy may have been no better than flat in the 2nd quarter, raising the possibility that the overall eurozone slid back into recession. Meanwhile, retail sales in the overall euro-zone declined again; Moody’s rating services downgraded U.K. banks from stable to negative; and the economic warfare of escalating sanctions being imposed by western nations on Russia, and retaliatory sanctions by Russia, is not a positive for the economies of either side.

On markets, the pullback has European markets oversold beneath their short-term 50-day moving averages to a degree that should bring at least a short-term rally attempt.

Let’s hope that if U.S. and European markets are to continue moving in tandem with each other, that European markets can rebound quickly back above their long-term 40-week moving averages before the U.S. market follows them into breaks below its long-term supports.

However, as the intermediate-term charts show, that has not happened very often in the past once that important support has given way.

It seems clear that short-term bounces notwithstanding, it is still a time to be very cautious and defensively positioned on both the U.S. and European markets.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2014 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules