Emerging markets, especially some of the smaller countries have been “HOT PERFORMERS” over the last 6 months, as the U.S. Dollar has declined over 15% since it peaked in June. See performace below, compared to the 500 index!
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While debate per if the U.S. will have a “double dip” and focused on the “disconnect” between the markets and fundamental news, these ETF’s have been moving nicely higher, making VERY GOOD MONEY for owners. With the Dollar at “potential” support and so few of Dollar bulls at hand, I wanted to update the price action of these hot ETF’s.
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In the above chart, a few support lines have been broken recently and support is being tested in the others. I harvested positions in some of these ETF’s earlier this week (see post) due to the pattern in the Dollar.
Let’s keep watching what happens with these very hot ETF’s, they might be sending an important global message. The trend has not changed, yet momentum isn’t as strong.
Looks like SSEC (Shanghai Stock Exchange Commposit) is now knocking on uncle Fibonacci’s door. Right on 61.8% retracement from 2007 high to 2008 low. Will it break through? Will the dollar continue the rebound? The suspence is killing me 🙂
Thanks for the great work. Your site is not just another pretty face. I am learn a lot from your blog.
Cheers,
Tom
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Mike, you are welcome.
Appreciate your viewership of the blog. I enjoy hearing from many people like you that have extra “pocket change” due to the research I share.
Thank you Chris. Most of the ETF have had good performance also for an € investor!!! Thank you for sharing and for your kind answers.
IS…
you are welcome. My goal as a research firm is to help you with just what you mentioned…do what you enjoy and get the research from others.
A friend of mine at JP Morgan has recieved charts like what you are seeing for more than 10 years. He calls it the “28-second Kimble advantage.” He can spend less than 30-seconds and see what to do on a variety of ETFs/indexs.
Chris,
Appreciate that you keep updating/reviewing/advising on all of these investment ideas/charts. I look at a chart and don’t see the patterns. I don’t even know where to start. So I’ve come to rely on you. Thank you for your hard work and sharing.
I think we’ve already had a lot of QE2 priced in, clearly that’s been what’s driving things for the last 6-7 weeks. The question is, will the real effects be the anticipated effects?
I think that depends on the size of the package and also on a lot of unknowns. QE1 worked well, but it came at a time of massive risk aversion. What happens when it arrives after the market has already went way long risk?
Personally, I think the expectations are completely out of whack. The fading out of the fiscal stimulus, and new talk of austerity, both here and in Europe, China, etc., is the much bigger story.
From a layman’s perspective, India and Chile look particularly weak. Brazil also (not shown)? Is it possible that emerging markets will be a leading indicator, before high yield bonds? Is there a historic pattern to this? In terms of ETF’s there are not a lot of options for shorting individual countries, except Brazil (BZQ), India (INDZ), China (YXI, FXP), Mexico (SMK), and almost all are double inverse (except YXI). EUM is an overall inverse play on emerging markets that may have reversed its downward trend.
As I noted before (per John Hussman’s weekly), if QE2 devalues the dollar, US imports may be curtailed impacting emerging market economies, and U.S stimulus spending has boosted these economies because QE1 was not effective at devaluing the dollar – but stimulus spending is waning. Just a story and not information that should be used for investment at this time, but something to be aware of as a potential future opportunity, especially given current weakness in emerging market ETFs.