The Wisdom in WisdomTree ETFs

JC Parets
November 15, 2019

There is information everywhere. We analyze both the Indexes and the ETFs. We look at markets all over the world priced in both local currency and in US Dollars. We often use Gold as the denominator as well as the Indexes themselves to analyze relative strength. It's one big giant web of money flow.

Today I want to call your attention to an interesting divergence that has come at important turning points in the past. Specifically I'm referring to the Wisdom Tree Hedged Exchange Traded Funds for Europe and Japan: $HEDJ and $DXJ respectively. These funds are priced in local currencies as opposed to most other ETFs around the world that are priced in US Dollars.

First, here is the Europe Index Fund priced in Euro breaking out to all-time highs. I've been chuckling to myself a lot lately because when was the last time you could say the words "Europe" and "all-time" highs in the same sentence with a straight face?

Click on Charts to Zoom in

What do we know about new all-time highs? They're not characteristics of downtrends. New highs historically precede even higher highs. I think specifically $HEDJ gets up towards 83.

And I don't think Japan is too far behind. It's not as clean as Europe, but the base and potential are both there:

From a more weight-of-the-evidence perspective, I really like the comparison between the two funds. When Europe puts in a higher high and diverges positively vs Japan, S&Ps and stocks around the world start to rally. This just happened again.

We've been so bullish of stocks because of the overwhelming weight-of-the-evidence pointing to higher stock prices. Buying stocks has been rewarding us much more than selling them. There is no holy grail indicator and this chart above most certainly isn't one. But when things like this keep adding up pointing towards much higher stocks prices, it's hard to ignore it, and it's even harder to bet against it.

Think about it like this. If people claiming the world is coming to an end are right, do you think European stocks would be breaking out to new highs? Heck no! They'd be right up front leading the global march to zero. So when the gloom and doomers have their day, and their 2 weeks of fame, you'll see it being priced into these charts above.

Today, the money flow is suggesting the complete opposite. The data continues to point to it being irresponsible not to be very long stocks right now. Specifically, we want to own $HEDJ if it is above 69 with a target near 83.

Let me know what you think!

JC

 

Also see our analysis on European Banks

 

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