The Macro Tourist Is Buying European Stocks (And ‘Lightly’ Shorting The Nasdaq)

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Remember all the ominous forecasts of doom last summer about European financials?  It seemed like everyone was extrapolating the downward trend to zero (and below).  When someone suggested maybe it wasn’t quite as bad as the doomsdayers were predicting, they were summarily laughed out of the room for just “not getting it.”

Well, as many of you know, I do not practice the dark art of technical analysis, but as far as my amateur eyes can tell, European stocks are breaking out!


In case you are worried about “chasing” the market up here, European stocks have been sucking wind for a long, long time.


When you compare the past twenty years to the S&P 500, the Eurostoxx is an embarrassment.  Here is notional index percent appreciation of the two indices during that period:


I don’t want to get into all the reasons Europe has performed so poorly.  Trust me, I know them.

And please don’t send me all your arguments about why their socialistic bureaucratic European Union is destined to fail.  I probably agree with your analysis anyway.

However, in the meantime while we are waiting for their system to implode, I suspect the Europeans will conclude that extreme monetary policy stimulus is counter-productive, and that their union is in desperate need of some fiscal pump priming.  Again, please don’t send your analysis of why the Germans won’t allow it.

The reason I don’t want to hear those arguments?  I think the market knows more and is starting to reflect this possibility.  Don’t forget, by the time it’s official news, you should be pulling out pink tickets, not blues.

I am buying this Eurostoxx breakout.  Usually these sorts of clean breakouts have the technicians in a lather, but this asset class has been unloved for so long, few are willing to climb aboard.  My sort of breakout.

I happen to think the US market is over-extended and in need for a pull-back, so I like shorting NDX futures on a light delta against the Eurostoxx long (emphasis on the word light folks).


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One thought on “The Macro Tourist Is Buying European Stocks (And ‘Lightly’ Shorting The Nasdaq)

  1. Not China as well as Europe? nCov is worse than they’re letting on, but the whole country and every stock in it basically gets a pass for 1Q and maybe even 2Q, plenty of time for the PPPT (Peking Plunge Prot Team) to do its thing.

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