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Europe Being Repeatedly Hit When Already Down!

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    August 20, 2014

    Tracking with the signals of our short-term technical indicators, European markets topped out in June. The U.S. market topped out into a less severe short-term pullback in July.

    Two weeks ago I said they were both oversold beneath their short-term 50-day moving averages to a degree that should bring at least a rally off the short-term oversold condition.


    While that rally is taking place in the U.S. market, Europe’s markets have not been able to get any traction. Every time they get off the floor onto their knees they are hit with more bad news that knocks them down again.

    This week it was the reports that the economic recovery in the euro-zone ground to a halt in the 2nd quarter, led by a surprising plunge by Germany’s economy to negative GDP.

    However, yesterday morning, European markets tried again to rally off the oversold condition. The German DAX was up 100 points, when the news came that a Russian military convoy had crossed Ukraine’s border and had reportedly been destroyed by Ukraine military forces.

    The DAX turned tail and dropped more than 230 points to close down 132 points on the day.

    However, regardless of whether this is the beginning of something worse or not, our-short-term indicators are saying the oversold condition should bring at least a rally back up to test the potential resistance at the 50-day m.a.

    That expected oversold rally is underway in the U.S. market.


    Other voices – Lots of choices – from one extreme to the other:

    From Barron’s: Stephen Auth, chief investment officer, Federated Investors:  “I call the economy “Goldilocks cubed” because we have what actually may be an accelerating economy, with the Fed and Treasury rates well-behaved and perceptions about risk declining. Market valuations depend on growth, bond rates, and perceptions of risk, and all three of those are going in the direction that actually expands the price/earnings multiple. At the same time, earnings are expanding, and that’s a recipe for another leg up in the market.”

    Business Insider Australia: “It seems legendary hedge fund billionaire George Soros might be souring further in his outlook for U.S. stocks, based on his most recent SEC 13-F filing in the U.S. It showed a 605% increase in his short S&P 500 position (through put options on 11.29 million shares of SPDR S&P 500 ETF) to $2.2 billion . . . . a whopping 16.65% of the total assets in his Soros Funds Management Portfolio.”

    Market Watch, Paul B. Farrell: Sometime after the Great Crash of 2016, Fed Chairwoman Janet Yellen will be testifying before Congress, just like Alan Greenspan was forced to do in 2008. She will be explaining why America has already had three mega-crashes in the 21st Century, each draining roughly $10 trillion, each a direct result of Federal Reserve policy failures. She will be forced to explain why the Great Crash of 2016 was a clone of the bank credit crash of 2008 and the 2000 excesses.”

    To read my weekend newspaper column click here: Bonds Persist in Their Warning About the U.S. Economy

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    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much 


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