Avoid European Stocks Until the Euro Stops Falling

On January 22nd, the European Central Bank announced the start of its Quantitative Easing (QE) program that will involve a larger than expected 60 billion Euro asset purchase per month. The Fidelity Europe Fund (FIEUX) responded with a rally, but it has not yet cleared the resistance level (see blue line on the chart):

fieux

At the same time, the Euro continued to drop against the dollar, which explains why European stocks are less attractive in U.S. Dollar terms:

fxe

The picture is completely different if we look at European equities in Euro terms. This chart shows a very bullish break out:

fieux-fxe

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King Dollar

Broad-based selling continued around the globe today due to increasing worries about the resolution of the Euro debt crisis. With almost all sectors and international markets dropping sharply there was no place to hide, with the exception U.S. treasury bonds.

However, as the bull run in treasuries is approaching an overbought condition and the dollar strengthening against all major currencies, that safest investment for individual investors may be dollar denominated money market funds.

The Fidelity Europe fund (FIUEX) dropped a whopping 3.72% today on renewed Euro debt worries and is approaching its support level.

The Fidelity Europe fund (FIUEX) dropped a whopping 3.72% today on renewed Euro debt worries and is approaching its support level.

 

Mutual fund screens are provided by FidelitySignal.com