Euro ‘Me Too!’ QE Trade, Part 2 Taking Shape

In Q4 2014 Europe was hated as an investment destination, what with pervasive deflationary pressures and little more than Draghi’s jawbone supporting the idea of a coming QE and a ‘me too!’ trade setup that would ape what went on in the US (to one degree or another), post-2012.

We watched the Euro for a bottom at a logical big picture point, as it declined to the lower line of its multi-year downtrend channel.  We watched the Euro STOXX 50 hold support, we charted a STOXX vs. the S&P 500 upturn and we projected part 1 of the trade.

The upside target was STOXX 3800, which was exceeded by momentum-hopped trend followers, as often happens.  Now, the correction toward re-buy targets is ongoing.  It is not there yet.

stox

What needs to happen is that the hype needs to die down.  By “hype” I mean media and well known investment analysts that came on to the Europe trade well after the bottom in Q4 2014.  They came out with their research reports and easy analysis and touted Europe as the trade of 2015.

Today?  Cue the crickets… they are going quiet and when the process completes, STOXX hits downside targets and Euro upside targets, we’ll be ready once again.  You need a wicked lotta patience, as we’d say in Boston.

Here is the Euro, looking middling but still well in play for potential rally continuation.  Beyond the bounce targets, reviewed again this weekend in NFTRH, Euro is massively bearish.  But again, a wicked lotta patience and ongoing perspective are required to manage this macro setup, along with all the others currently in play.

xeu

Finally, as a de-risker to the whole thing we’ll need to see Spain-Germany, the country equity credit spread chart, intact at the appropriate time.

ibex.dax

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