Europe On a Breakout Sep 11, 2017 European equities are staging a bit of a breakout to start off the week, with the STOXX 600, a broad benchmark of European equity market performance, trading up just under 1% and back above its 50-DMA for the first time since late June. Today’s rally in the STOXX 600 is also notable due to the fact that the index is poised to break out above both its 200-DMA and 50-DMA on the same day. Looking at the chart below, the index has also broken its short-term downtrend that’s been in place ever since it last traded above the 50-DMA, and that could open the door for more short term gains. Looking at the chart below, it doesn’t look as though it has been a particularly good year for European equities, as the STOXX 600 is up just 4.9% on the year. For US investors, however, the picture for European equities looks a lot rosier. The primary reason for this is the weak US Dollar, which has impacted the performance of various assets classes in a big way. We covered this topic in detail in last week’s Bespoke Report newsletter, so if you are not a subscriber, we strongly recommend that you take advantage of our special introductory $1 offer and check it out now! The chart below shows the performance of the STOXX 600 index, but instead of local currency terms, we show how performance would look when translated into dollars. In other words, for a US investor, how has performance looked? In this scenario, the STOXX 600 is not only not in a downtrend, but it is breaking out of a multi-week consolidation phase. Rather than being up just 4.9% YTD, in dollar-adjusted terms, the STOXX 600 is up close to 20%! Like just about everything else in life, when it comes to market returns, perspective is everything.
Time for Europe to Shine? Posted by lplresearch As we noted yesterday, small caps have improved and technically could break through a significant trendline that would suggest continued strength. That would be a good thing for the bull market in the U.S., but an even more important bullish development could be taking place overseas. The Euro STOXX 50 (think of this as the Dow for Europe) is in the process of breaking out above a bearish trendline that has been in place for more than 17 years, which could bode well for continued strength into 2018. Here’s where things get interesting. The monthly chart above shows the Euro STOXX 50 has broken above its long-term trend, but the weekly chart below shows us that the breakout hasn’t happened yet. This is why it is important to look at varying timeframes. Given various global markets are already breaking out, it is likely only a matter of time until the Euro STOXX 50 breaks out above this trendline. Per Ryan Detrick, Senior Market Strategist, “Though when looking out into 2018 we continue to see better opportunities domestically and in emerging markets, Europe is finally pulling its own weight. This is yet another sign that we are amid a global bull market and it should continue into 2018, if not further.”
