timwest
Long

SPDR Euro Stoxx 50 - FEZ - Weekly - Long term underperformance

AMEX:FEZ   SPDR EURO STOXX 50 ETF
278 7 9
S&P500             -SPY- Weekly - Red compares to the Euro Stoxx 50             - FEZ - Weekly:

This spread is a new one to me - but seems worthy of some deeper consideration: Look at the performance of the European Top 50 Stocks Index . For 10 years it has gone NOWHERE while the S&P500             is now up 64% over that time frame. Each pays a dividend and FEZ pays a lot more than SPY             , but the point here is that if you have money in the S&P500             and IF YOU WANT TO FIND SOMETHING ELSE TO BUY, you would definitely want to consider FEZ as a replacement for the longer term. Your income increases to 3.3% from sub 2.0% (more than a 50% jump in your income).

From a market neutral perspective, it seems very easy to go long FEZ and sell short SPY             , dollar for dollar, and hold this position for a year or two. The return would come from the relative return of these two instruments. A 60% return in a year or two seems very possible. Catalysts would be needed, of course, but I wonder if the recent S&P500             correction will lead investors to search far and wide for alternatives and then move their money slowly over time.

Tim 1:36PM EST October 13, 2014
SPY             190.82 +0.28 last (sell short)
FEZ 37.22 +0.43 last (go long, buy)
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2use
2 years ago
I also think this needs more digging into. Note that EU dropped before US - it is already more than 10% down. In 2008 it was vice versa with the all time high. That volume though - are the volume figures correct?
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European Union is falling apart. Capital flows are shifting away from European economy as big money sees writing on the wall and is pulling cash out. This divergence will only grow.
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2use Pink Grasshopper
2 years ago
Well, it won't fall this year. But im looking at a already 10% corrected european index and 6% corrected US one. For now i wonder if they can go higher, because if not, its further down hill already (and US and EU have not yet started to boil, all postpone the changes)
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I have to disagree with you on this one Tim. US, Canada, Germany, Italy, England, Japan and more stock markets are correlated. I can't see one going up and one going down. That can only happen for a few days. Besides this, I believe that Europe is going to fall much harder than US in the coming months. Instead of playing a spread trade or whatever this is called, I prefer playing a relative strength trade, and the simple fact is that European stocks are weaker than US stocks, and that includes all the developed countries in Europe.
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2use vlad.adrian
2 years ago
EU Already has gone down more than US.
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vlad.adrian PRO 2use
2 years ago
And it will continue to go down more. No reason to buy the laggards and sell the out-performers.
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2use vlad.adrian
2 years ago
Agreed, until i feel it has potential. It did do a small run up recently, but lower highs ...and you know the rest
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