Using OEW we have been tracking 8 of Europe’s most important stock market indices: England, France, Germany, Greece, Italy, Spain, Switzerland, and the hybrid STOX 50. In general, since the 2011 low in most indices, and the 2012 low in some other European indices, all of these stock markets have been rising. Over the past year, however, we have been noticing some fairly negative, and potentially completing, long term patterns unfolding.
England and Switzerland, in particular, have had very choppy patterns since their highs in May 2013.
In fact, the wave activity since their June 2013 low looks like a large fifth wave diagonal triangle.
While France has risen more than England and Switzerland in percentage terms, its 2014 rise also looks like a diagonal triangle.
To put these daily charts into perspective, we offer the cleanest long term wave pattern of the three: Switzerland. This long term pattern suggests the rise from 2011 has been a Primary C wave, of an ABC pattern from the 2009 low. This pattern, as well as many other foreign indices, look nothing like what has been occurring in the US. When these diagonals complete, these three indices should have their largest corrections since 2011. The charts of Germany, Italy and Spain support this potential scenario.
Germany has been rising in a five wave pattern since 2011. This is quite similar to the five wave pattern, over the same period, in the US. Recently it has been in a Major 5 uptrend since March. When it concludes it is likely ending Primary wave III.
Italy and Spain have been in similar bull markets since 2012. Italy appears to be in its last uptrend from that low.
Spain appears to require one more downtrend, followed by another uptrend to complete its five wave pattern.
When we review the Primary III pattern in the DJ World index, it look quite similar to Germany. Its Major wave 5 is not subdividing either. It skipped the US downtrend in April, just like Germany. Therefore, when this uptrend ends it should also end Primary wave III.
Overall we observe that Europe is aligning for a significant market decline in the second half of 2014. This appears to fit with our projected Primary wave III top, in the US markets by Q3/Q4 2014.