Europe's Energy Sector: "The Lehman Moment Just Arrived"

This company's stock price "broke a support shelf that dates back 14 years"

By Elliott Wave International

Back in October 2021, two months before Germany's DAX hit an all-time high, our Global Market Perspective showed a big jump in references to "Lehman" in Bloomberg News.

Of course, the use of "Lehman" in a news article has become synonymous with the collapse of the then financial giant during the depths of the 2007-2009 financial crisis.

The October 2021 Global Market Perspective, an Elliott Wave International monthly publication which covers 50-plus worldwide financial markets, said:

The Lehman moment will come later, after investor optimism has receded and stock prices are well off their highs.

That was a year ago, and since then, Europe's key stock indexes have been in a downward trend. In other words, investor optimism across the Continent has indeed receded.

The October 2022 Global Market Perspective noted:

Right on schedule, the Lehman moment just arrived at one of the Continent's most critical sectors: "Europe's Lehman Warning on Energy Prompts Flurry of Cash Aid" -- Bloomberg, 9/6/22.

The October Global Market Perspective continued with these charts and commentary:

The chart shows stock prices at two of Europe's utility behemoths. Centrica, the largest supplier of gas to domestic customers in the UK, trades at levels last seen in the 1990s, while Fortum Oyj, Finland's largest company by revenue, dropped 68% over the past nine months and broke a support shelf that dates back 14 years.

... The Finnish government stepped in with a €2.4 billion bridge loan to Fortum, while Centrica is seeking billions of pounds of financing amidst soaring demands for collateral.

Then there is this chart of Uniper, the European gas giant sitting at the epicenter of the energy earthquake. On September 20, the German government forked over 8 billion "to nationalize the gas giant and stave off a collapse of the country's energy sector." (Bloomberg, 9/20/22)

Stave off a collapse? The chart shows that Uniper has already collapsed despite every effort.

Some of Europe's energy sector firms face the same kind of liquidity problem which wrecked established investment banks a decade ago. Uniper was reportedly losing €100 million per day in early September, and Fortum's collateral requirement jumped by €1 billion over one single week.

Getting back to the downtrend in major European stock indexes, the Elliott wave method for analyzing financial markets can help you determine if the decline in prices is nearly over or if there's much more to go.

If you need to brush up on your Elliott wave knowledge, or are entirely new to the subject, an ideal resource is Frost & Prechter's Wall Street classic book, Elliott Wave Principle: Key to Market Behavior. Here's a quote:

[R.N.] Elliott himself never speculated on why the market's essential form is five waves to progress and three waves to regress. He simply noted that that was what was happening. Does the essential form have to be five waves and three waves? Think about it and you will realize that this is the minimum requirement for, and therefore the most efficient method of, achieving both fluctuation and progress in linear movement. One wave does not allow fluctuation. The fewest subdivisions to create fluctuation is three waves. Three waves (of unqualified size) in both directions would not allow progress. To progress in one direction despite periods of regress, movements in that direction must be at least five waves, simply to cover more ground than the intervening three waves. While there could be more waves than that, the most efficient form of punctuated progress is 5-3, and nature typically follows the most efficient path.

If you'd like to read the entire online version of the book, you may do so for free once you become a member of Club EWI, the world's largest Elliott wave educational community (about 500,000 worldwide members and growing rapidly).

A Club EWI membership is also free and allows you complimentary access to a wealth of Elliott wave resources. All the while, you are under no obligation.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Europe's Energy Sector: "The Lehman Moment Just Arrived". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Here's Why This Bear Market is a "Global Story"

"The decline started in emerging market stocks way back in February 2021"

By Elliott Wave International

A widely accepted measure of a bear market is a drop of 20% or more in a major index from an all-time high.

By that measure, both the S&P 500 index and the Dow Industrials have entered bear market territory since their January peaks.

Yet, Robert Prechter's Conquer the Crash offers a message for those entirely focused on U.S. stocks:

The emerging bear market is a "global story."

That assessment is certainly validated by this chart and commentary from the October Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets and more:

The decline started in emerging market stocks way back in February 2021. It spread to major world stock markets, excluding the U.S., in June 2021. Both these indexes fell below their early 2020 peaks earlier this year. The top graph shows the Dow Jones Industrial Average, which peaked on January 5 of this year and [in the week of Sept. 19-23] declined below its early 2020 high.

Another message which Conquer the Crash emphasized is the "all the same market hypotheses." As the book notes:

When stocks turn down, it will signal a major liquidity contraction, and all major asset classes should decline together.

This message is also being currently confirmed. Let's return to the October Elliott Wave Financial Forecast:

Clearly, liquidity is waning as normally disparate assets are starting to trend together. [In the last half of September], for instance, the decline in stocks was joined by a decline in bond prices, precious metals, FOREX, commodity indexes and oil.

There's even been a correlation between stocks and Bitcoin.

Now is the time to prepare for what is likely ahead.

An ideal way to prepare is to become familiar with the Elliott wave patterns of major global stock market indexes, including the U.S.

If you're unfamiliar with Elliott wave analysis or need a refresher, you may want to read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or "waves," that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path.

Here's the good news: You can access the entire online version of the book for free once you become a member of Club EWI, the world's largest Elliott wave educational community. A Club EWI membership is also free and allows you free access to a wealth of Elliott wave resources on financial markets, investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Here's Why This Bear Market is a "Global Story". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Yes, Elliott Waves Work with Individual Stocks -- Here's How

"The primary value of the Wave Principle is that it provides a context for market analysis"

By Elliott Wave International

Elliott waves reflect the repetitive patterns of mass psychology -- so they are ideally suited for analyzing the widely traded main stock indexes.

On the other hand, thinly traded individual stocks may not trace out Elliott wave price patterns nearly as well.

That said, there are many individual stocks which are widely traded -- like most of the big and well-known companies (and others which have captured the interest of investors).

Consider the stock of the largest bank in the U.S. Back in March, our Global Market Perspective showed this chart and said:

This chart shows the five-wave pattern of JPMorgan Chase's rise from March 2009 to September 2021.

Of course, the completion of a five-wave up pattern means a downtrend is next. When that analysis published, the share price was $134.40. As of this intraday writing on Oct.3, it's $106.79.

Let's go back in time to review another example of how Elliott wave analysis can be applied to an individual stock.

This case-in-point involves GE. The September Elliott Wave Theorist was discussing wave analysis with individual stocks and showed these side-by-side charts and said:

The October 27, 2000 [Global Market Perspective] published the chart on the left, showing a completed Elliott wave in GE stock. This quarter-century pattern portended a major reversal. The chart on the right shows what happened thereafter.

Not every forecast based on the Elliott wave model works out perfectly. At the same time, keep in mind these words from Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior:

The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market's general position and outlook. At times, its accuracy in identifying, and even anticipating changes in direction is almost unbelievable.

If you'd like to read the entire online version of the book for free, you may do so once you become a member of Club EWI, the world's largest Elliott wave educational community (approximately 500,000 worldwide members).

A Club EWI membership also opens the door to free access to a wealth of other Elliott wave resources -- such as videos and articles from Elliott Wave International's analysts.

Jump on the Club EWI bandwagon now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

Are You Prepared for Widespread Bank Failures?

"This time, the world economy appears to be on much shakier footing"

By Elliott Wave International

The ideal time to prepare for most anything in life, especially a potential circumstance that's adverse, is before it happens.

The problem is: Many people don't know what will happen in their lives ahead of time.

However, sometimes warnings are provided yet they're ignored or not taken seriously. A current warning from Elliott Wave International which people are urged to take very seriously is that the economic slowdown could morph into something far worse than a garden-variety recession.

Here's what Robert Prechter's Last Chance to Conquer the Crash has to say:

In 2008-2009, some U.S. banks came under pressure of insolvency, just as the first edition of Conquer the Crash predicted. Fed bailouts kept most of them open. In the next depression, bank runs and mass closings are far more probable.

Indeed, a troubling sign for the banking industry has already started to develop.

Here's an Oct. 3 headline (Business Insider):

Credit Suisse is fending off concerns about its financial health, fanning fears of another Lehman Brothers moment that could roil the global financial system. ...

The next day (Oct. 4), Barron's had the straightforward headline:

Credit Suisse Is In Deep Trouble.

In a nutshell, the Swiss banking giant plans a massive restructuring, and executives recently had to reassure major clients and investors about the bank's liquidity.

Concerns about the financial health of Credit Suisse doesn't mean that a systemic banking crisis will start tomorrow or next week. However, it may be a good idea to check out the financial health of the bank or banks with which you do business, especially considering the broad backdrop -- as represented by these headlines:

• Global Manufacturing Index Contracts for First Time Since 2020 (Bloomberg, Oct. 3)
• IMF presents 'darkening outlook' for global economy (UPI News, Oct. 6)

Days before that global economy headline published, the October Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, showed this chart and said:

This chart of Global Real Economic Activity ... shows that the world economy is heading into an extraordinary period of economic contraction. The trendline points out a long-term divergence from the last peak, in May 2008, which followed the Dow Industrials' October 2007 top by eight months. The latest peak in the index came in October 2021. ... This time, the world economy appears to be on much shakier footing.

Now is the time to prepare for what may be just around the corner.

One way to prepare is to get a handle on the stock market's trend because the stock market tends to lead the economy.

The Elliott wave model can help you analyze the stock market.

If you're unfamiliar with the Elliott wave model or need a refresher, the definitive text on the subject is Frost & Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote:

All waves may be categorized by relative size, or degree. The degree of a wave is determined by its size and position relative to component, adjacent and encompassing waves. Elliott named nine degrees of waves, from the smallest discernible on an hourly chart to the largest wave he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. The specific terminology is not critical to the identification of degrees, although out of habit, today's practitioners have become comfortable with Elliott's nomenclature.

If you'd like to read the entire online version of this Wall Street classic, you may do so for free once you join Club EWI, the world's largest Elliott wave educational community.

A Club EWI membership is also free and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading.

Just follow this link to get started: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Are You Prepared for Widespread Bank Failures?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

THIS is Why the Real Estate Tide is Turning

Here's your next step to get a handle on the global property market.

By Elliott Wave International

Treat houses as a consumption item -- or simply as a place to live, and history shows that real prices will fluctuate only modestly over the decades.

Treat houses as an investment, and the value of houses takes on the characteristics of the stock market.

This is from the January 2012 Elliott Wave Theorist, a monthly publication which covers financial markets and major cultural trends -- in the wake of the prior housing bust:

Real home prices [in a U.S. index] stayed within a range of 66-123 [from 1890] until 1997. Then they went straight up for 9 years. Inflation doesn't account for the rise in real prices, because inflation has been factored out. And loans were available for decades without causing real prices to soar. Why did it finally happen? ... Real estate began to take on the aura of being an investment.

As we know, after going up for 9 straight years, the housing market then crashed -- just like the stock market is apt to do at times.

That same psychology of "a house as an investment" sent prices soaring again in the most recent housing bubble.

However, trouble has already started to brew. Here's a Sept. 2 CNBC headline:

1 in 5 home sellers are now dropping their asking price as the housing market cools

This brings us to Elliott Wave International's latest analysis -- which is provided in the just-published special report "Home Prices: How Much Trouble Are YOU In?"

Here's just one of the several charts you'll find in the special report, along with the commentary:

Many of the cities that led the real estate market on the way up are now doing so on the way down. Home sellers in former boomtowns have been quickest to lower asking prices. ...

Nationally, Redfin reports that the percentage of sellers lowering their prices is the largest since it started tracking the data in 2012. ... The tide is turning.

Likewise, builders themselves have been reducing prices. A Sept. 24 Yahoo Finance article noted:

Almost 1 in 4 home builders reported reducing their price this month, up from 19% in August ... Home builder confidence fell three points to its lowest level since May 2014.

You'll find more evidence in the special report that the "tide is turning" for the U.S. housing market, including examinations of housing starts and what's going on with a firm that's been a big player in the housing flipping business.

And getting back to asking prices, you may be interested in knowing that on August 15, Bloomberg reported that asking prices in the United Kingdom fell at their fastest pace in two-and-a-half years.

Speaking of which, the coverage in the special report extends beyond the U.S. as Elliott Wave International looks at European, Asian-Pacific and Australian property markets.

Here's the good news: You can access the special report "Home Prices: How Much Trouble Are YOU In?" for free for a limited time.

Just follow this link: "Home Prices: How Much Trouble Are YOU In?"

This article was syndicated by Elliott Wave International and was originally published under the headline THIS is Why the Real Estate Tide is Turning. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.