Let’s do a quick recap of the week’s activities where the greenback (USD) and the Euro (EUR) are of popular concern and how this effects and has effected the stock market. The start of 2015 brought in a dismal beginning for the European stock market, however still keeping up appearances, the Eurostoxx is up by almost 20% since early January and the sad sate with the European equities makes it firmer than it seems. The continuously falling Euro this week is now due to the QE soon to be presented by the European Central Bank (ECB). Will money from the US flow to Europe? I am not so sure about this.
On the Eurostoxx index and the S&P 500 charts it appears the two indices had moved together and have normalize. Even though the US index still hits record highs the Eurostoxx looks to be moving in its own direction and away from S&P 500 and may even look to be out doing its American opponent. Perhaps now is the best time to see a change in the 5-year momentum and give the European stocks a chance to overtake.
Always worth your time is having a look at the fundamental analysis for that region when trading on indices. Looking at the economic surprise index is always a good way to see what the sentiment is of other economists and investors. Citigroup is a good provider of the economic surprise indices for all the major economies. Things you will note and find out for example is the rise by 1.5 at an all year high by the European index and on the other hand the dip in the US index that landed at a 2 year low which totally missed expectations. However, still the USD was on the rise despite the negative attention surrounding the US. Bringing me to my next point.
While the price to earnings ratio of the US stocks are slowly lowering in comparison to its successful European counterpart in the January price rally, the European index is still struggling and is way off their 2000 highs, whereas the US pricing continues to move into record trading territory and grows from strength to strength. Looking for the value and opportunity for investors, lies possibly in taking profit on US stocks and likely continuing to maneuver into European territories where the value of their stock looks more striking and this detail is magnified when the US economic data continues its miss on expectations.
What does the future hold?
I feel European stocks will continue to try and make up for lost time with it US equals it does not make sense to me that the USA will lose totally in the next few weeks. The reason for this assertion is that US index has a much bigger technical sector that is driving the gains behind the US stock markets. It may be that the US tech stocks could excel, and this could keep S&P and the Nasdaq fully supported and safe from a steep sell-off.
Today’s Trading Tip:
While European stocks may continue to outdo their US counterparts, I feel it’s wise to look at both these popular stocks rising together and not isolating one, in particular. The only safe bet for the next month or so would be looking to the strengthening of the European stocks.
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