Wednesday, August 7, 2013

FEZ likes Mark Carney

New Bank of England Governor Mark Carney made his debut monetary policy announcement today saying he will keep interest rates low and maybe expand further until  unemployment in the UK falls to 7%, which he anticipates will take about two years.  The dovish policy is in line with expectations which contributed to the SPDR DJ Euro STOXX 50 Fund (FEZ) moving up to 9th place.  It has had a choppy year of trading and Quant has done a good job calling the wiggles. 

It made the top 10 for the first time last August before going on a world leading 20% run. High Fundamental Scores and bearish sentiment gave FEZ the 10 Green Diamond Reward Rating on 17 days in August and September.  It fell out of the top 50 on a number of days in the early autumn but got back to the top 10 at a low in mid November.  Fundamentals were not as high then but sentiment drove it back to the upper ranks.  It began to lose top 50 status again in December as fundamentals and sentiment deteriorated even as technicals improved.  Its next trip to the top 10 was in late February after a 10% correction helped get those fundamental and sentiment scores back up, this time as technicals weakened. Poor earnings reports dinged the Fundamental Score through much of the spring but high sentiment scores kept the fund in the top 50 for most of the time. It dropped out of the top 100 in mid May after clawing back that 10% winter correction.  Traders who used the exit from the top 100 as a sell signal were glad as the fund went back down to its prior lows in the worldwide late June swoon.  It made it back to the top 50 on July 9th, top 20 on July 16th and top 10 this week.  Today’s 9th place rank is driven by a 76.8 Fundamental Score and 73 technical score although current bullishness on Europe has brought sentiment down below 60. 

Traders have done well with FEZ when it has ranked in the top 10 and long term investors have had to endure some volatility but are net positive from any of those points.  If you don’t mind its higher than average 5.26 Red Diamond Risk Rating, FEZ looks like a good way to ride that Bank of England liquidity.  

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