Home > Uncategorized > MARKET NOTES: What do the Europeans say about equity markets?

MARKET NOTES: What do the Europeans say about equity markets?

MARKET NOTES:  What do the Europeans say about equity markets?



Despite a common currency, [excluding UK] the European markets show a great amount of diversity in their equity markets.  Here is quick look at the state of play in these markets after the second LTRO when the Greek problem is supposedly behind us.



French CAC:  CAC did not make a new high in July of 2007 and stayed below the high mark of 6780 made in September 2000.  CAC has an important long-term support at 2400, which for many years used to be the top of the French markets in the 90s.  After the peak of 2000, CAC has come back to test the 2400 support twice.  It was first tested in February 2003 and then again in March 2008.  Needless to say, it held firm both times.  Going by the wave structure from September 2000 to March 2008, CAC should have completed its almost decade long correction!  So why is it languishing here at the 3500 mark?


One hypothesis would be that CAC is keeping pace with world markets though even that doesn’t explain its level of 3500 when the US markets are relatively placed much higher.  Note that CAC bottomed out recently at 3000 exactly on the long-term trend line that spans from 1988 to date.  One would be foolish to be a long-term bear in such a market.


Nevertheless, CAC has faithfully followed the US market gyrations from July 2007.  While there is no reason for it to continue to do the same, there is no compelling reason to break step either.  Accordingly, CAC could correct along with US markets though the correction will be much shallower.  In price terms a correction down below 3000 is unlikely.  The point to note is that CAC may be coiling up for an explosive breakout sometime towards July/August this year.  Time for any lurking bears to cover shorts.



German DAX:  DAX is positioned more or less like the CAC but is not as out of kilter as the formers.  Firstly, DAX equaled its July 2007 top with the one it made in March 2000.  So it didn’t under perform as much as the CAC.  Secondly, its current value at 6840 is not as low as that of CAC relatively speaking.


DAX too keeps pace with the US markets in terms of ebb and flow though not valuations.  That implies DAX too will correct more or less line with US equity markets up to July/August.  The correction may not be as shallow as that of CAC but may not be as steep as that of US markets either.  Significant that both the major EU markets have already bottomed out.



UK FTSE:  The wave structure of UK markets mirrors that of it European cousins rather than the cousins across the Atlantic being very close to what the DAX has been doing since September 2000.  It is currently placed at 5790 and headed into a correction till July/August this year.  It is hard to see the FTSE correcting significantly below 5000 levels by then.  So time for bears to exist in the ensuing correction.



Greece General:  Back in 1993, Greece began a great bull run from 560 to hit a high of 6375 in June 1999.  It has since dropped hitting a low of 664 in January 2012 when I first mentioned that the Greek markets might have bottomed out in this blog.  After a rally to first overhead resistance at 830, the index is correcting again.  It will probably correct in line with other European markets and may come back to retest 660 again.  There isn’t much to lose in Greek markets but conversely, unless you believe in miracles, the performance too may not be all that great.



Spain, Madrid General:  For a technical analyst this one is a no brainer.  Note the trend line spanning from 1984 to date.  Every major correction has ended on this trend line the latest being in November 2011.  While Spain may not break ranks with other European cousins, and break out from here, it doesn’t have much of a room to go down other unless it breaks the long-term support line.  Hard to see why it should do so.  Also note Spain did not rally with the other European or US markets and so is unlikely to follow them down.  This is one market that bears should exist pronto before they are gored by Spanish bulls.




NB: These notes are just personal musings on the world market trends as a sort of reminder to me on what I thought of them at a particular point in time. They are not predictions and none should rely on them for any investment decisions.




Categories: Uncategorized
  1. March 16, 2012 at 7:13 pm

    very informative post, help to novice.

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