European Stocks

One of the most remarkable things about the Elliott Wave Principle is its ability to forecast the market's path. Not just the final destination, but how it will get there.

That's an important distinction. It's one thing to forecast a market gain or loss -- conventional analysts on TV and in print media do it all day long. It's quite another to outline the actual twists and turns the market will take to achieve your price targets; a rare forecaster can do that.

Prices never move in a straight line. You may be expecting your investment (or trade) to double, but on its way there, it'll have enough intermediate peaks and valleys to cause plenty of heartburn. Knowing the market's projected path greatly reduces the stress of your investment decisions. While others are guessing whether to stay in or get out, with Elliott wave you know the answer long before they do. While others are jumping ship, you know to stay calm and stay in. When they stay in, you know to get out.

What makes this possible is that the Wave Principle looks for specific patterns in market charts. Once you've identified what part of the pattern you are in, you can have a reasonable expectation for what comes next. This diagram shows the idealized Elliott wave path in a bull market. (Flip it upside down for a bear market.)

Why am I writing about this today? I was re-reading the April issue20 of our European Financial Forecast (EFF) and on page 5 saw a remarkable chart. It's a long-term chart of the UK Financial Times All-Share Index going back to the 1960s -- with the label "You Are Here" on it and a diagram of its projected path. In the words of the EFF21 editor Brian Whitmer,

Asian Markets: A Phoenix Rising

There's a strong historical precedent for Asian markets to climb when the U.S. falls. Consider the 1966-1982 bear market in the U.S., which saw the DJIA drop 14%. During that same period, Japan's Nikkei 225 gained 389% and India's stock market gained 233% while several smaller markets made even larger gains. This chart tells the tale









How can this be? The APFF reminds us that "The only factors you need to consider when forecasting the direction of an index are its own long-term and short-term wave patterns." In other words, while the U.S. is currently riding a long-term bearish wave, several Asian markets are beginning powerful bullish waves.

Remember that stock market indexes reflect the valuation of a society's productive enterprise, its social mood. The U.S. and other nations are mired in deep bear markets while others soar because "individual indexes follow their own wave paths because each society generates its own mood internally."
The bearish social mood and "global financial crisis" may slow down the U.S. and other world markets, yet there's always a phoenix rising somewhere; and in fact, the April Asian-Pacific Financial Forecast outlines the case for four new bull markets in Asia. These markets have "completed only three waves down from their respective highs, which makes them strong candidates to rally back to at least near their all-time highs – if not beyond."

Consider the evidence for yourself in the just-published, April 3 Asian-Pacific Financial Forecast. You'll also receive the March 23 APFF Interim report that describes the urgent investment opportunities in Indian stocks

EUR/USD: Don't Get Distracted by News

U.S. Dollar Generally Weaker As Equities Remain Modestly Higher
Thu Apr 9, 2009 07:34am (CEP News) - The U.S. dollar is weaker against most major currencies on Thursday as global equity markets continue to move higher. The greenback's limpness can also be attributed to the aftermath of a larger than expected Japanese stimulus package, and some potentially upbeat results on the stress tests for U.S. banks.

It all sounded good: Stocks were up, the dollar was lower, and central banks were in control. And yet shortly after, the USD took the upper hand and by lunch time on Thursday strongly gained on the euro, pushing the EUR/USD 200 pips lower. (That's despite the fact that the DJIA was up 200 points Thursday morning -- aren't U.S. stocks and the dollar supposed to diverge?)

How can that be? As we've said on these pages before, what matters to the trend is not the news -- it's how forex traders react to it. News can be a catalyst, but the direction of the move is always going to be determined by how traders collectively feel about it. If they are bullish, they'll use the news -- any news -- as an excuse to buy, and vice versa if they are bearish.

That's why the real key to the forex market is knowing the collective mental state of its participants. And that's exactly what Elliott wave analysis tells you. On Wednesday evening, Elliott Wave International's intensive Currency Specialty Service13 posted this forecast:

EURUSD
Update for: Thursday
Posted On: Wed, 09 Apr 2009 04:00:34 EDT
[Topping, lower] While not by much, EUR$ traded lower for a third straight day. Add to that the rebound we did see is, so far, in a corrective three waves to resistance in the 1.3300 area. There is no reason to alter the larger bearish outlook.