The Bulls versus the Bears: Winners and Winners from the E.U. Debt Crisis

(eToro Blog) There’s a saying that sometimes you just have to make your own luck. Well, the crisis in the Eurozone – which has been protracted well beyond all reason – has created an interesting opportunity for quite a few traders. Let’s look at how this has all played out thus far.

Granted the debt crisis has been bad for the Euro and everyone knows that the Euro bulls are unhappy and scratching for every single pip, relishing any short-lived relief rally. On the other hand, Euro bears are relishing their profits and happily putting in their sell orders in order to take advantage of the too-few-and-far-between relief rallies. It’s all a matter of perspective, really. But while the die-hardest Euro-bulls might be hard-pressed to make a decent profit with the Euro’s steady decline, investors who are willing to shift sentiment or rethink their portfolio can take advantage of the opportunities which will soon present themselves.

Yes, we’re talking about liquidity. Again; it’s that important to the global economic recovery. Analysts, including our own Lior Alkalay, have pointed out time and time again that market jitters can be subdued to a great extent if only the world’s central banks would get on the liquidity bandwagon. It seems that that is exactly what is happening now; central banks are becoming more accommodative in the face of a mounting disaster. We’ve seen it in Japan, Australia, China and England.

We expect we’ll be seeing that from the U.S. central bank perhaps as soon as tomorrow. Analysts are forecasting that the Fed will likely take on a more accommodative stance given the deterioration in both the U.S. jobs sector and the global outlook. But the issue will be whether or not the Fed offers markets an outright asset-purchase type of easing which would be bullish for equities and commodities, rather than simply an extension of the Fed’s Operation Twist scheme, which would cast a bearish pall on investors’ sentiment.

As for the Eurozone’s own central bank, well, the ECB dances to its own tune, so markets will have to wait and see if the pressure that will surely be borne on them is sufficient to hasten along another LTRO or a rate cut.

Regardless of which central banks will or won’t play follow the leader, the opportunities are already presenting themselves with the onslaught of newly minted cash. Naturally, Wall Street will be a major recipient of that excess liquidity, but so too is gold which is priced in U.S. Dollars and will be cheaper as the greenback’s value erodes.

Gold and equity bulls are already shoring up their positions in advance of what some analysts are already calling a stimulus boom. As of this writing on OpenBook, by a 4 to 1 ratio, gold sentiment is being driven by buyers; OpenBook guru peischen is poised to capture significant profits if and when gold prices begin to climb, and could clear out several older positions. Over the past month the guru increased his allocation in gold to 43.9% with a 0.3% gain.

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