The Stoxx Europe 600 index and its 600 components, represents the performance of a mix of large, Medium and Small companies in 17 European countries and approximately 90% of the market capitalization of the European Market.
When analyzing the European Stoxx Europe 600 Index, we noticed how a quadruple top is forming on the long term price chart, which, in conjunction with how other global stock markets have been performing, indicates that the resolution of this quadruple top will have a global ripple effect.
So from a chart perspective, which is the ultimate compass for any investor, the event we are looking at is a ‘breakout’ vs a ‘breakdown’. One of the two will materialize very soon. Such an event is critical, and the fact that most financial media are not talking about it stresses the importance for smart investors (not the opposite). Below are the details with annotations shown on the chart:
European stock market chart: the 2018 make or break moment is near
Stoxx Europe 600 could either breakout to the upside or breakdown from what we note on the chart below. If the price breaks above the 400 to 420 area, a rally will likely follow for European equities.
This outcome will have a major impact on (several) global stock markets in particular:
If European stocks breakout, we expect a massive capital flow from the US markets to the European Stock market. The movement will happen rather quickly as there are many analysts and nvestors thinking that the US markets are rather overextended, in addition to the concerns with Trump Tariffs: “Trade wars are easy to start, but winning them is another question altogether,” according to Daryl Guppy .
Should that happen, we still believe Emerging markets will be leading in terms of performance with European stocks next.
In case the Stoxx Europe 600 get rejected again, we have the confirmation that European equities are not going to outperform US equities which should push the performance of the latter even higher and fuel the rally in US equities that started in 2016. This in short is why we believe that European equities are at a make or break moment
Until the Quadruple top is resolved in European stocks, the European and US stock markets are tied for now.