Thursday, October 31, 2013

Europe is On Fire

We are making another dramatic comeback upwards from a healthy selloff overnight after the FB AH pump and dump and the FOMC sell the news reaction spooked short term traders.  Right now, European equities are the hottest financial asset in the world.  It was massively underweight in global portfolios for years and years, and finally this summer, fund managers started to accumulate.  Experienced traders who trade the overnight market realize that the ES makes its overnight move usually during the European trading hours.  Asia really has little effect on the ES.  With a strong Europe, like the strength shown today, you usually end up with a gap up in the U.S.  You may sometimes get a flat open, but difficult to get any sizeable gap down with the kind of strength exhibited in Europe.

This European trend of equity accumulation before the US market opens makes it tough to go short overnight.  Like any other hot money trend, it will run out of steam, but European equity outperformance should last for the rest of the year.  As for FB, I think it is untouchable from the long side for at least another week.  I would look into getting long the tech momos again after TSLA earnings probably disappoint daytraders.


Anonymous said...

I am new to European equities. Do you have any recommendation for European stocks? Thx.

Market Owl said...

I don't follow individual European stocks, I just follow the European stock indexes. There is a popular European ETF which is VGK. But I usually look at the DAX and Eurostoxx 50 futures to see how the European markets are trading.