Unlocking the mystery of building trading strategies

Unlocking the mystery of building trading strategies (via Futures Magazine)

Traders generally fall into one of two broad categories: Discretionary and systematic. While both groups develop and follow their own trading strategies, the systematic trader typically automates an objective set of trading rules that define exact conditions…

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The Safest Way to Bet on a Rebound in Europe

By WallStreetDaily.com

Don’t look now, but the investment world is warming up to Europe.

“There are a few blooms sticking up from the frozen ground,” says Steve Koenig, an analyst at Wedbush Morgan Securities.

Over at BlackRock, Chief Investment Officer, Nigel Bolton, believes that we’ve reached “a significant turning point for equity investors [in Europe].”

Credit Suisse (CS) is a believer, too. The investment giant recently instructed investors to overweight European banks in their portfolios.

Same goes for JP Morgan (JPM). Equity strategists at the firm now expect Europe to enjoy better growth in the second half of the year.

Talk about fashionably late!

You’ll recall, I’ve been banging the contrarian drum on Europe for the better part of the year, recommending the SPDR EURO STOXX 50 Fund (FEZ).

And about one month ago, I also urged you to take advantage of a once-in-a-30-year buying opportunity in European bank stocks via the iShares MSCI Europe Financials ETF (EUFN).

But I’m not here today to establish bragging rights. Instead, I’m here to provide a safe way for skittish investors (i.e. – the non-contrarians) to take advantage of the opportunity in Europe before it disappears.

As Thanos Papasavvas at Investec Asset Management notes, “[Europe is] very underinvested from a global-investor perspective.” But that won’t be the case for long. Here’s why…

Follow the Stock Market’s Lead

Make no mistake, we’re witnessing a data-driven – and therefore, legitimate – change of heart on the part of Wall Street analysts when it comes to Europe.

You see, the economy (and currency) – which was once on the brink of complete and utter disaster – is finally on the road to recovery.

Case in point: the latest reading of the Eurozone PMI Composite Output Index. Any reading above 50 indicates expansion. And it just checked in at 50.4 in July – the highest reading in 18 months.

The data underscores the European Commission’s expectation that the eurozone economies will return to growth in the fourth quarter.

I’ll concede that a GDP growth estimate of 1.4% in 2014 isn’t China-esque. But growth is growth. And it’s a definitive sign that Europe isn’t going to fade to black.

Of course, as I’ve long contested, we only need conditions to transition from “bad” to “less bad” for equity markets to respond. That’s happening. And stocks are responding right on cue…

Over the last month, European stocks are up 8.2% – nearly doubling the return of U.S. stocks.

And European bank stocks are performing even better. After hitting a series of higher lows in late June, the iShares MSCI Europe Financials ETF rallied 9.9% in July.

Now, if you’re still too scared to dip your toes in Europe via one of these ETFs, you can still benefit from the imminent turnaround… With a homegrown opportunity, no less.

Built Ford Tough

Back in May, I introduced a brilliant stock indicator based on Ford (F) F-150 trucks. In short, since small business owners account for a large portion of pickup sales, by gauging sales of F-Series trucks, we can track the health of the overall economy.

And Ford is certainly firing on all cylinders in the United States. Pickup sales, in particular, keep climbing higher. All told, Ford is going to enjoy its best sales year in the United States since the recession hit.

Conditions in Europe haven’t been so rosy. But, again, the data points to an imminent turnaround.

During the company’s quarterly report last week, management noted that European operations still incurred a loss. However, results improved quarter-over-quarter and year-over-year. In other words, the bottom is in.

More importantly, Ford has been able to increase its market share in Europe through the downturn. So as the recovery takes root – and its European operations return to profitability – the company should rake in even more revenue.

Bottom line: Ford represents a unique, safe and cheap way (shares trade for less than 12 times earnings) to profit from a continued recovery in the United States – and the imminent rebound in Europe.

So I’ll pay homage to Jeff Foxworthy and say it again… You might be a redneck if you drive a pickup. But you’d be a pretty darn smart redneck if you also owned a few hundred shares of Ford.

Ahead of the tape,

Louis Basenese

The post The Safest Way to Bet on a Rebound in Europe appeared first on  | Wall Street Daily.

Article By WallStreetDaily.com

Original Article: The Safest Way to Bet on a Rebound in Europe

US Fed maintains QE plan, says expansion modest

By www.CentralBankNews.info     The U.S. Federal Reserve will continue to purchase $85 billion of assets a month to support stronger economic recovery and confirmed that a highly accommodative policy stance will remain in place after quantitative easing ends.
     While the Federal Reserve largely repeated last month’s statement, it added that economic activity had  “expanded at a modest pace” in the first half of the year, a slightly weaker description than in June and earlier months when it used the word “moderate” to describe the economy.
    The Fed also added in this month’s statement that inflation “persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
     Taken together, these two minor changes to its statement may signal that a planned tapering of its asset purchase program later this year could be pushed back further, though the Federal Reserve’s policy-making body, the Federal Open Market Committee, did not make any specific references to this.
    Overall, the Fed still saw diminished risks to its economic outlook, expecting economic growth to improve from its current pace due to its accommodative stance and that the unemployment rate will continue to decline.
    On June 19 Fed Chairman Ben Bernanke said the U.S. central bank would probably start reducing its asset purchases later this year and end the purchases mid-2014 if the economy continues to improve. Financial markets expect the process of trimming asset purchases will begin in September
    The Fed has held its policy rate, the federal funds rate, at 0-0.25 percent since December 2008 and repeated that it will maintain this policy stance for “a considerable time after the asset purchase program ends and the economic recovery strengthens.”
    To give financial markets a better guidance of how long rates will remain at essentially zero, the Fed also repeated that the federal funds rate would remain at this level at least as long as the unemployment rate is above 6.5 percent and inflation does not exceed the bank’s goal of 2.0 percent.
    U.S. Gross Domestic Product expanded by 1.8 percent in the first quarter from the fourth’s quarter’s 0.4 percent for annual growth of 1.8 percent, slightly up from the fourth quarter’s 1.7 percent pace but down from the third quarter’s 2.6 percent.
    The unemployment rate was stable at 7.6 percent in June and May, but up from April’s 7.5 percent while the headline inflation rate in June was 1.8 percent, up from 1.4 percent the previous month and April’s 1.1 percent.