In the past week, we’ve seen EURUSD finding sellers into 1.0800, and European equities underperforming that of the US. This makes sense given the unfolding economics and flows, and while the NAS100 is clearly loved, I see the probability skewed for further outperformance.
A tactical view on this theme is a Short EUSTX50 / Long NAS100
I like this ratio lower – this means I expect the NAS100 to continue to outperform the EU Stoxx 50. Where if both indices rise, I expect the NAS100 to rise at a faster pace. If they both fall, then the trade works if the NAS100 falls at a slower pace.
I can currency adjust, so both legs are priced in USD terms – apples and apples. Again the ratio is falling, so it’s not just a EURUSD play.
As with any trade a stop loss represents how much risk I can take on – here, I would look to close when the ratio pushed above 0.34. Long/short strategies tend to have longer hold times.