The ETF to Watch as Traders Fall Back In Love With Europe

Stock traders should watch the Vanguard FTSE Europe ETF as money flows back into Europe

Senior Vice President of Research
Mar 31, 2017 at 3:30 PM
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I am seeing more and more evidence of investors falling back in love with the Europe trade. Per a BofA-Merrill Lynch survey, 23% of fund managers think European equities are undervalued, while 81% think U.S. stocks are too expensive. I went back and looked at the last time global managers thought the U.S. was this overvalued: it was in 2004, when the S&P 500 Index (SPX) rallied 9%. Against this backdrop, I decided to take a look at the Vanguard FTSE Europe ETF (VGK), which tracks major European markets and has been interesting on the charts.  

Investors loved Europe going into 2016. VGK traded in the red throughout 2016, with low points around the negative 10% and 15% year-to-date marks. Coming into this year, and in the wake of the surprise Brexit vote, Europe was out of favor. But VGK has been in the green throughout 2017, taking out its 2015 close at $49.88 in mid-March. And the ETF is currently outperforming the SPX. That said, below are the VGK levels on my radar:

  • $49.32 is 0.8 times the 2014 closing high -- a resistance area for much of 2016, located right below the round-level $50 mark
  • $51.98 is 1.2 times the 2016 closing low  
  • $52.06 is the recent intraday high on March 21, with no closes above $51.98
  • $52.64 is 10% below 2015 closing high

VGK europe etf chart




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