The Wisdom in WisdomTree ETFs

by JC Parets  -  November 20, 2019

Listen, I know there is a lot of data out there. So much so that there’s bound to be room for reasonable disagreement now and then.

But at this moment there just isn’t a convincing argument that we need to be looking to sell stocks. I’ve got to say I really can’t imagine how exhausting it must be to take bullish data points and then spin them into a bearish narrative every single day – just because you’re too afraid to admit you’re wrong. What you are you so scared about?

Today I wanted to share one more piece of evidence to in support of my point here.

Europe and “All-Time Highs,” You Say??

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 U.S. 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 WisdomTree Hedged exchange traded funds for Europe and Japan: NYSEArca: HEDJ and NYSEArca: DXJ, respectively. These funds are priced in local currencies as opposed to most other ETFs around the world that are priced in U.S. dollars.

First, here is the Europe index fund priced in Euros 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?

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 near $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 versus Japan, S&P 500 stocks and equities elsewhere around the world start to rally. This just happened again.

Look at the Evidence

We’ve been so bullish on 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 doom and gloomers have their day, and their two 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.