Insiders are shorting – or betting against – a major world currency, the Euro (EURUSD). This is according to the latest commitment of traders (COT) report.
Whenever this happens, I get interested, because that is how we can spot major potential opportunities.
For example, a few months ago I told my premium members that insiders were buying the Canadian Dollar (CAD). Since then the CAD has rallied strongly higher (and the USDCAD has dropped like a lead baloon).
Of course, just because insiders are shorting the Euro, it does NOT mean that the Euro is about to collapse any time soon.
The Euro can still continue to go higher before it finally starts falling due to insider shorting (make sure you watch my premium video this week as I shall explain how we plan to short the Euro).
If the Euro is being heavily shorted, then there is a strong likelihood that eventually anyone holding the Euro currency is going to see a depreciation in their savings or holdings.
This is specially true of anyone investing in European stocks. European stocks are still undervalued and are largely ignored by many Americans (which is actually a good contrarian sign for EU stocks).
So one way to hold European stocks AND be hedged against a falling Euro is to look at this ETF called HEDJ:
Here’s what etf.com says about HEDJ:
“HEDJ targets dividend-paying firms, and as the ticker implies, aims to remove euro currency exposure for US investors. But HEDJ adds a third twist: It screens for firms that get at least 50% of their sales from exports outside the Eurozone. Such firms should do well when the euro is weak or weakening.”
However, etf.com warns that:
“In a strengthening euro environment, the fund, hit by poor local returns and no FX gain, would lag an unhedged fund by an even greater amount.”
Personally, I think that if insiders are betting against the Euro (as we know they are), then perhaps it is better to be “hedged” than “unhedged” against a potentially falling Euro.
As the old saying goes: “Hope for the best… but prepare for the worst”.
By the way, I still remain bullish on European stocks and as the above chart shows, I am looking for this correction to finish and the next rally higher (wave 3) to continue soon.
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