Someone with neurosis typically shows excessive anxiety and/or
exhibits indecision with no real identifiable reasons.
Symptoms associated with neurosis include insecurity, depression or
irrationality.
nEUROsis Taken to Another Level
In the investment world, the media seems to be the perfect
example of neurosis continuously showing indecision in their
reporting. Check out these headlines from the same trusted
news source over the past two weeks:
- Improving European Peripheral Bonds- 1/28
- Europe Bears have Thrown in the Towel - 1/31
- Stocks Decline the Most this Year as Spanish Yields Climb -
2/4
- European Stocks Drop on Concern over Italian Austerity -
2/5
Just last week, peripheral Europe was all fine and dandy.
Now Spain is back in the picture as its government yields are
on the rise again. Last week all the European bears
were gone. Now, pressure returns to Europe as its markets
sell off over 3% from their highs last week. Talk about
neurosis, indecision, and not having a clue!
There is no way to make rational investment decisions using news
reports. Even if you tried you would be whipsawed daily,
buying and selling as the media repeatedly changed its mind about
the future of Europe, primarily based on how equities performed
that day.
A Better Way to Follow Europe's Situation
One of the problems with the news is it often relies on opinions
and rhetoric that is rife with conflicts of interest and statements
made more for positioning and jawboning than for fact.
We prefer to ignore the daily back and forth and use
evidence instead to make trading decisions on the Euro
(NYSEARCA:FXE) and other investable assets such as the S&P 500
(NYSEARCA:SCHB), long term bonds (NYSEARCA:TLT), and commodities
(NYSEARCA:SLV).
On 7/1 with the FXE at $125.88, in our Technical Forecast and
shown in the chart below, we alerted subscribers that a
wonderful short setup in the Euro was here: "
Traders can look at buying the -2x Euro (NYSEARCA:EUO) or the
newly created -1x Euro (NYSERCA:EUFX)
ETFs
to short. Once again the risk is small, but reward potential
is large."
The charts were warning us in June that the trend in the Euro
remained down although the general mood was positive, even boldly
suggesting that Europe's problems were history.
The target we identified was exceeded later that week as FXE was
down significantly just as Wall Street then decided to turn very
bearish on the Euro. That's when we took profits.
We wrote:
"The euro short has performed extremely well...Once again
aggressive shorts can cover and wait for a pullback".
The following chart was also included in that update.
What's Next for the Euro?
After the July bottom, the Euro has generally rallied (now around
$133 on FXE) where longer term retracement levels reside.
This rally has also been accompanied by a very large swing in
sentiment from this summer's bearishness to today's
uber-bullishness, which is a warning sign that the Euro is likely
nearer a top than a bottom. We are now watching a few key
price levels very close to being breached to warn confirm a trend
change.
And European Stocks?
After falling 5% from their highs, the technicals are getting
very close to also confirming a trend change from up to down for
European stocks. Once they do, the bullish sentiment and
media tilt will likely help facilitate a further selloff as
sentiment again swings from a bullish to a bearish extreme.
We have identified a key trendline to watch in the Vanguard
European ETF (NYSEARCA:VGK) that will help identify that
change in trend from up to down.
Other, more aggressive, exchange-traded
products (ETPs) that can be utilized to take advantage of
the downside in European shares once the technicals confirm are
buying the ProShares UltraShort MSCI Europe (NYSEARCA:EPV) or
shorting the ProShares Ultra MSCI Europe (NYSEARCA:UPV).
The
ETF
Profit Strategy Newsletter
filters out the unhelpful and neurotic media by using
comprehensive technical analysis and data based decision-making
techniques to keep us on the right side of the markets. A few
times each week we update our subscribers on actionable high
probability trading setups that also identify risks and profit
targets like those for the Euro, European stocks, and their
tradable ETFs.
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ETFguide