The broader European financials space has not yet shown the same technical deterioration as its domestic equity counterpart.
Financials have been the talk of the town across financial markets over the past week. The stress of banking failures in the U.S. carried over into international equity markets, leading to the collapse and subsequent acquisition of Credit Suisse, a prominent global financial institution that had been in business since 1856. This broader weakness from financials led the sector to drop rapidly across most of our relative comparisons for US equities. However, we have not seen the same relative weakness from broader European financial representatives, at least not yet.
This can be seen through the iShares MSCI Europe Financial ETF EUFN, which we highlighted earlier this month for its rapid price ascension. The enhanced volatility seen in financials over the past few weeks did lead EUFN to retract from its rally high at $20 to ultimately notch a low at $17.25, marking a decline of just over 13% in about a week. It is also worth noting that EUFN was sitting on a significant stem in a heavily overbought position prior to this move, potentially amplifying the magnitude of the decline. The low at $17.25 caused the weekly overbought/oversold reading to flip to a -113% oversold reading through the movement on Friday (3/17), leaving the fund in a heavily washed-out position. This week led to two consecutive days of sharp improvement for EUFN on Monday and Tuesday, leaving the fund at the current chart position of $18.50. It is worth noting that Wednesday has seen the fund retract slightly, though not enough to change the default chart with a loss of just 0.89%. That also marks the first trading day out of the past ten trading days that EUFN has not moved at least 1.5% in any direction.
Even with the increased volatility March has brought for EUFN, the underlying technical picture for the fund remains favorable with a strong 5.69 fund score paired with an intensely positive score direction of 5.44. Taking a step back and simply viewing the point-and-figure movement also presents a positive picture; we see a security that is trading on two consecutive buy signals, pulled back from an overbought territory after an extended rally, marked a higher low and reversed back up toward the mid-point on its trading band. Most broad financial representatives on the US equity side cannot say the same, as they have generally shown further technical deterioration. While we may not want to view the European financial space in the same light that was used a few weeks ago, it is important to understand the differences in the movement between domestic and international equity markets.
