At mianalysis, I’ve directed position traders to focus more on ETFs associated with the forex, bond and commodity markets than equities recently. Some of these markets show better trends and the stock market has been hyper-sensitive to the news flow (stocks have rebounded nicely but I still believe intermediate-term risks remain).
TOP PICK
The euro’s value to the dollar shows one of the most appealing chart structures. You can trade this market through FXE (CurrencyShares Euro Trust). The euro/dollar traded in a range of 1.34153-1.27546 dollars most of the time from December 2011 through early September this year. On September 18, the euro broke out from that range, as the Fed’s decision to maintain its current level of quantitative easing sent the U.S. dollar’s value tumbling.
NO TAPERING YET
I think all paper assets are pricing in more QE right now (especially after the signs of softness from last week’s Beige Book), which should be net positive for stocks, Treasuries and the euro, and bearish for the greenback.
THE BOTTOM LINE
The breakout in the euro after such a long range suggests there should be more upside to come. Additionally, RSI averages rounded off nicely at the 50 midline and rallied back up, behavior that often precedes a sustained move higher as momentum leads price.
