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Strong equity markets haven’t just been confined to the US in the last several weeks.  In fact, Russian equities (cue conspiracy theories) have put up more than twice the gain of US equities since the election with the Micex up over 10%, and the US ETF of Russian stocks (RSX) up over 14%.  Last week, European equities entered the fray as the STOXX 600 broke out above resistance around the 350 level to its highest level since the opening days of 2016.  The chart for the STOXX 600 is looking quite constructive these days as the index looks to be breaking out of a multi-month consolidation range after breaking its downtrend back in August.

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Although European stocks have been rallying, it has been on the back of a weaker currency.  Therefore, if you are a US investor holding European stocks, the gains in prices have been offset by a weaker currency.  Two years ago, the Euro was at 1.25 versus the dollar.  Since then, it has declined over 15% to around 1.05 versus the dollar.  This morning, the currency has seen a bit of a bounce at the 1.05 support level, but just like resistance weakens the more often it is tested to the upside, support also tends to lose strength the more often it is tested to the downside.

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