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Over the past few years, the Euro doesn’t have a bad track record per predicting the direction of the U.S. equities markets. Of late the Euro broke support of a bearish rising wedge, after hitting the top of its trading channel! Dollar sending a similar message? (see post here)
Euro sending a good sign per how to construct a portfolio right now???
Belsha…you are 100% correct, that the Euro is not a full proof indicator! In 2008 when it declined, stocks suffered for sure. The next wedge break, did stock decline? Nope, they did go sideways for months, having monies in the market, buy and hold, was dead money. Now time will tell if the Euro declines and if stocks follow or are dead money again. The best part about being aware of these patterns in the Euro…knowing when to be heavy long or when to harvest. When the Euro was low, what should we have done per stock positions.
Full proof? Not! Helpful, I hope so…
Chris
Yet the euro doesn’t seem to be so foolproof an indicator for the stock market:
— Markets started to fall in the summer of 2007 when the euro was only in the middle of its rally that went until July 2008, when stock markets had already declined by 30% or so.
— Euro hit its low in october 2008 and staged a huge short term rebound. This wasn’t the best time to buy stocks, but with hindsight not the worst either…
— Euro made highs and started crashing in october-november whereas stocks were to continue rallying for a nother 5 months. When the “flash crash” happened the euro was actually near its lows…
So in summary, the euro can lag or advance stock prices by a very significant margin…