Not being one to “name names”, I won’t pick on anyone in my profession (Canadian or American) who were recommending European equities over the past year. But there were lots of them–especially the Portfolio Managers who focus their attention on ETF’s.
As you can see on the STOXX 50 chart–good old technical analysis will have saved us from following that type of poorly timed advice. Google “Portfolio Managers recommend Europe” for fun and see how many managers recommended the ETF’s surrounding the European markets last summer- when those markets were about 30% above current levels. Further, we can easily see why we should continue to avoid this index. The crux of this message is: Analysts (and Portfolio Managers) can be wrong, but the charts NEVER lie!
The Euro STOXX 50 index is a good representation of the European market, as seen through the largest stocks trading on the major European exchanges. After peaking last April, the STOXX 50 has been in a major downtrend. It’s been making lower highs and lower lows. Its below its 200 day MA. Further, its broken its 2014 support of around 3000 recently. This index has been, and remains ugly.
The ETF’s that follow European equites have suffered the same fate as the SOXX index. Here in Canada, the hedged iShares ETF (XEH-T) has followed a bearish pattern, along with the iShares (IEV-US), which is one of the bigger and more liquid ETF’s tracking European markets. IEV broke its significant support of around $40/share recently – adding more fuel to the already bearish trend on this index orientated ETF. I simply cannot find a technical reason to be bullish on Europe.
With Greece and its debt problems starting to come back into the spotlight, and the rising fears surrounding violence by isolated immigrant communities in many of the major European city centers, it’s not just the charts that suggest we continue to avoid investing in that part of the world.
You may not have access to all information available, but you do have access to charts and their patterns. And those patterns tend to tell us enough about the big picture to make better calls. I continue to endorse using basic trend analysis to ascertain whether the advice of any analyst, investment manager or investment guru is likely to be accurate going forward.