In the second part of a series this month, we examine how major stock indices globally are behaving during a time when US indices are showing signs of exhaustion.
In the previous post we identified resistance areas and a possible turning point in the Global Dow Index (INDEXDJX:GDOW). Now we turn to regional indexes, beginning with the Euro Stoxx 50 Index (INDEXSTOXX:SX5E).
The Euro Stoxx 50 Index includes 50 blue-chip stocks from 12 eurozone countries. It serves as the underlying for a variety of futures and options contracts, as well as exchange traded funds such as the SPDR Euro Stoxx 50 ETF (NYSEARCA:FEZ).
Throughout the past year, Euro Stoxx 50 has obeyed the boundaries of a Schiff channel that is remarkably similar to the one we showed for GDOW in the previous article, despite the fact that the two indices have only a little bit of overlap in terms of the stocks they include. Price for Euro Stoxx 50 tested the upper boundary of the channel late in 2012, and it is yet unclear whether that test represented the completion of a large corrective move upward. Economic factors would suggest there is little potential for stock prices to go much higher in the eurozone, but unexpected news events have pushed prices back and forth for several months and could conceivably prompt a retest of the boundary.
Euro Stoxx 50 and the Global Dow seem to have taken the same form during the whole long corrective move since August of 2011. The Elliott Wave structures for the two indices fit similar counts. Even the largest difference between the indices during that time was minor. Where GDOW traced a substantial downward correction lasting from August to November 2012 (the downward 'b' wave inside the larger '(y)' wave), the equivalent correction in Euro Stoxx was smaller. As a consequence, the move upward out of the correction in Euro Stoxx also was more muted, and thus it has not reached what normally would be the first expansion target at 2716, where wave 'c' would equal the Fibonacci ration of 0.618 of wave 'a.' It is quite possible that index will fail to reach that target, especially considering that it has already fallen away from other types of resistance.
If the Euro Stoxx 50 Index falls from the current area, then the decline should be of a similar magnitude to what was seen in the index during spring and summer of 2011. It is yet too early to attempt to calculate price targets for a decline.
This article originally appeared on Trading on the Mark .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.