European Markets 18 02 2010

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FTSE, DAX, AEX, CAC, SMI, Euro Stoxx 50 and Special OpportunitiesThe European Short Term Update

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Elliott Wave Internationalhttp://www.elliottwave.com Financial Forecast European Short Term Update February 17, 2010

[Posted:] Wednesday, February 17, 2010

[Bottom Line:] Strength in regional equity prices exceeded our expectations. Two possible wave countsapplicable to most indices both allow for some further upside, but maintain the longer-term bearish outlook.


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http://www.elliottwave.com Financial Forecast European Short Term UpdateFebruary 17, 2010 2

[German Bund Futures]German bund futures registered a new all-time high within the past two weeks. Theyve done this whilerallying in what can only be called a corrective advance. As such, we believe wave (B) continues to unfold.Moreover, as EWI forecasts further difficulties in European sovereign debt markets, it is reasonable toassume that German bunds will be viewed as a safe-haven alternative during any upheavals. Therefore, werecognize the potential for additional new highs. We are watching the long-term uptrend in the DailySentiment numbers. A break in that trendline will likely mark the completion of wave (B) in bunds.


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[DJ Euro Stoxx Futures]The extent of the current rally has negated our previous wave count showing nested one-two waves to thedownside. There are two possible counts that apply to most regional markets at this time. We debated inearlier editions whether or not a small second wave formed off the January high. Our preferred count nowshows that second wave, which makes five waves completed at the early February low, and therefore allowsfor a more extensive countertrend rally at this time. Our alternate count is for the current rally to be wave (c)of an expanded flat that will carry above the wave (a) high. Both wave counts have similar implications -

potentially more rally and an eventual bearish resolution. The fine print here for the Elliottician is that whetherthe current move up is five waves (wave (c)), or three waves (wave ii (circle)), will ultimately determine whichwave count prevails.

We continue to expect a dollar rally (euro decline) to be part and parcel of the move lower in equity prices.The euros attempt to rally now is already faltering, a fact we believe will be reflected in similar downwardpressure in equity prices in due time.

Short term, the current rally may carry up to the 2847 level of the February 3 high before prices turn downonce again.


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[Germany DAX Index]The two possible wave counts outlined above apply equally to the DAX index. Were just illustrating the

preferred count to avoid repetitive discussion. The February 3 high at 5731 is the potential target for thisrally.


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[Great Britain FTSE 100 Index]

The FTSE 100 has already reached the level of the previous fourth wave at 5305 (todays high, 5304). I amnot convinced that this rally will have any staying power, but there are no indications yet of a potentialreversal in our short-term indicators.


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[France CAC 40 Index]The CAC 40 may bounce up to the 3830 level in this rally. The alternate count shown for the DJ Euro Stoxxabove appears unlikely for the CAC, as the drop into early February would be a very large wave (b) underthat interpretation.


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[Netherlands AEX Index]The wave count for the AEX is not pretty. There arent five waves down into the low without overlap, whichforces us to consider the expanded flat scenario. But here, wave (b) is larger than wed prefer. At best,

further price action will clarify the wave count going forward. For now, the implication is a move up to 335before prices turn lower once again.


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[Spain IBEX Index]

The IBEX is struggling to bounce here. We continue to feel that Spain, Italy and Greece present the bestintermediate-term bearish opportunities in the region. If prices were to reach the 38% retracement level at10804 in coming days that would be a gift for the bears.


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[Belgium BEL 20 Index]Last week we wrote, [The decline the BEL 20 is clearly only three waves so far.] Well its still only

three waves. There ought to be stiff resistance at 2550. If prices get above that level, well have to reconsiderour intermediate-term bearish view on Belgium.


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[Italy S&P MIB Index]Like Spain, Italy is a downside leader for the region. Any further rally into the 22,000-22,500 region presents

a bearish opportunity.

[Edited by Chris Carolan] Wednesday, February 17, 2010

Correspondence is welcomed and appreciated, although I cannot always reply to every note [email protected]

New Subscriber, or just need a refresher? I've written a few "concept" paragraphs on how I approach themarkets with details about a few custom indicators that subscribers have found helpful. Find them here: http://www.elliottwave.com/wave/ESTU-intro


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European Markets 18 02 2010