Naked and Afraid

Thomas Thornton, Hedge Fund Telemetry info@hedgefundtelemetry.com

11/19/2018

European markets have been in a bad way making lower highs and lower lows for the past 12 months.  Euro Stoxx 50 is down 12.5% from the high in early December 2017.  Every index has had a tough time while the Euro has also dropped after peaking in early 2018.  There are a few potential reasons for why Europe has been weak – On going Brexit negotiations, Italian new Government budget fight with ECB, and the ECB’s tapering, China trade wars, and the continued weakness in European banking shares. (I probably missed a few)  For the banks, it’s been more about the weak bank balance sheets than earnings.   Growth measured by economic reports isn’t as bad as the equity markets suggest, but some key manufacturing sectors like auto manufacturing have cratered with a double whammy of slowing demand and threats of tariffs from the US.  As far as valuations, the Stoxx 600 now trades at a price-to-book ratio that is almost half that of the S&P 500 Index.  What is it going to take to end the lower highs and lower lows trend?

Let’s look at some charts of the key markets and charts of current sentiment for what is next.

We’ll have another note out in a little while with US markets and the usual macro markets.  We will be posting more notes throughout the day focusing on different markets.  Thanks again for your patience as we roll out our new site and platform.  Take a look at all of our daily sentiment charts where you can adjust time periods going back to 2000.  There are new European markets added with our new site.  You might need to do a hard refresh (Shift + F5) on the page to update yesterday’s data.

EURO STOXX 50

Euro Stoxx has a pattern that is similar with all of the other markets of lower highs and lower lows.  The current DeMark Indicators suggest the pending red Sequential downside Countdowns will be cancelled tomorrow with the completion with the green Setup 9’s.  On this index it achieved the downside wave 5 price objective too.

EURO STOXX 600

Euro Stoxx 600 is a broader index and also on day 8 of 9 with green Setup.  This was in wave 3 of 5 on the downside unlike some of the other indexes.  

EURO BANK INDEX

Euro Bank Index daily and weekly both show potential for downside exhaustion very close.  The daily could see one more push lower and the weekly does have downside exhaustion signals but it did not get into the downside 5th wave.  

GERMAN DAX

DAX shows the lower lows and lower highs pattern with the 50 day moving average working recently as resistance  

UK FTSE 100

UK FTSE 100 did reach the downside 5th wave down but didn’t get the downside Countdown 13.  

ITALIAN FTSE

Italy also reached the downside 5th wave downside price objective with a Combo 13 at the lows.  

FRANCE CAC 30

 CAC 30 does not have the similar upside green Setup count yet this did achieve the downside wave 5 price objective (and a bit of a puke lower).  

SPANISH IBEX

Spain like most of the others is on day 8 of 9 with upside green Setup.  It is very likely tomorrow will get the green Setup 9 cancelling the downside red Sequential Countdown.  The 5th wave price objective got close enough.

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