Thursday, May 2, 2013

The Fed backed off the taper talk but the US market seemed more concerned that all the liquidity hasn’t helped employment yet.  Over in Europe, the ECB just announced it will cut its lending rate to 0.50% to help rescue Europe’s worsening economy.  ECB Chairman Mario Draghi is on record saying solutions need to come from the political realm but he’s under pressure to buy more of the bonds the politicians are issuing.  European markets have been doing better in recent weeks exemplified by a 7% rally in the SPDR DJ Euro STOXX 50 Fund (FEZ) after correcting by 11% from its February 1 high.   That has broken a downtrend but its Quant Score has not yet broken out in a similar way.

The fund performed very well since scoring well last year and despite a difficult 2013 it has mostly held those gains.  It maintained high Quant scores into late February when its Total Score peaked above 74 but dropped through most of March to a low of 62.7 on March 27th which pushed it out of the top 100 but only for a couple of days.  That marked a lower low in its price which was successfully retested a couple of weeks ago.  Its Total Score got as low as 65.6 a few days before that retest but rallied up to 70 and 11th place overall on April 25th.  Its Behavioral Score took a mysterious hit the next day but good price action has brought it back and today’s 68.5 Total Score is good enough for 17th place and an 8.19 Reward Rating.

European markets are mixed on the ECB decision awaiting what Chairman Draghi has to say in his press conference before US markets open.  They say the best time to buy stocks is in the depths of a recession but only hindsight tells when those depths have been reached.    Even though FEZ’s 5.05 Risk Rating is higher than most equity funds, sitting so close to its 200 day moving average should mitigate some of that risk compared to the 8% gap for the S&P.  Still closer to its 2009 low than its 2007 high, FEZ has been outperforming the US benchmark for a couple of weeks but today looks to be pivotal for Europe’s equity markets and how they score in the ETFGsm models.  Those models continue to favor the US market which will get its own test with tomorrow’s employment report.  So check back each day for the models’ message which is bound to shift eventually.

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