Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

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