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HIGH ALERT: Euro-Zone, Spain, Italy



February 04, 2013 – Comments (0) | RELATED TICKERS: EWI , EWP

At this time, the major stock indexes around the world are surging sharply higher. Every economy in the world seems to once again, be clicking on all cylinders. Japan, Europe, England, China, and the United States are just a few major economies that are soaring higher on a daily basis. It looks as if the central bankers around the world have put out the fire which they are ultimately responsible for starting. As it seems, money printing has saved the day again, or has it?

Many economists are now euphoric and believe that we have now entered the next growth phase of the economy. History tells us when this euphoric chatter by economists happens it could be a warning sign of things to come, and it is usually not good things. Two economies that could be in trouble again are Spain, and Italy. Recently, the FTSE MIB Index (Italy), and the IBEX 35 Index (Spain) have begun to rollover, while the rest of the global stock indexes continue to make new highs on a daily basis. The Italian and Spanish markets can be tracked by following the iShares MSCI Italy Index Fund (NYSEARCA:EWI), and the iShares MSCI Spain Index Fund (NYSEARCA:EWP). Remember, these two economies are much bigger than Greece so this could be a potential bearish catalyst for the major stock indexes around the world. After all, how much bond buying can the central banks do before the world markets says "enough already."

Germany and France are considered the strong horses in the European Union. If the CAC 40 Index (France) starts to rollover the problems in the European Union could snowball from there. Movie stars and former politicians seem to be fleeing France at an alarming rate. This defection by several prominent French people is most likely due to the 75.0 percent tax rate on people earning over 1,000,000 Euro. Who in their right mind would stay in place like that? There is simply no incentive to make money and this will most likely destroy innovation. Traders can trade and follow the French market by using the iShares MSCI France Index Fund (NYSEARCA:EWQ).

Germany is probably the closest thing to a solvent nation in the Euro-zone. This index can be tracked and traded by following the iShares MSCI Germany Index Fund (NYSEARCA:EWG). If this index stages a sharp decline, it is telling us that problems are on the horizon for the European Union. Traders better keep a close eye on the European Union again. The trading action in the Spanish and Italian stock markets are just a few clues that this volcano is about to erupt again.

Nick Santiago

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