Several months ago the Power of the Pattern suggested to Premium Members they should be looking to go long European Stocks or Create a market neutral Spread trade by longing EFA and Shorting the 500 index.
Why go long Europe when they were having such trouble? See below for why the Power of the Pattern was suggesting to buy European stocks.
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The above chart is a ratio chart, which reflects long periods of out performance or under performance of the 500 index compared to EFA. Since 2008, the S&P 500 had outperformed EFA for the past four years, reaching oversold extremes.
Even though the S&P 500 has done well over the past 6 months (gaining 10%) EFA has made TWICE AS MUCH.
If history is a decent guide, after SPY outperformed EFA for four years, the recent relative strength of EFA for just six months, should have more to go!
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