Author: Tarquin Coe
Covestor model: Market Timing Technicals
Disclosure: None
Up until recently, emerging markets, a “risk-on” leader, was breaking down on a relative basis. Such weak performance was threatening the bull market argument. However, like Technology and other higher beta areas, the emerging markets have tended to turn tail at the final hour.
The past few weeks have seen renewed strength from the group. Against the S&P 500, the iShares MSCI Emerging Markets ETF (NYSE: EEM) bottomed in February just above two-year support. That ratio is now rallying hard and reasserting the primary relative uptrend that started in late 2008. The action is supportive towards the overall bull market.
Within the emerging market group, Brazilian equities are showing outperformance and it is this area we plan to buy into this week.
First on our shopping list will be the iShares Brazil Index (NYSE: EWZ), an ETF which yields a handsome 3.8% as of 4/1 (Yahoo Finance). Also ear-marked are a number of Brazilian ADRs such as Braskem (NYSE: BAK), Brasil Telecom (NYSE: BTM) and Telecomunicacoes de Sao Paulo (NYSE: TSP).
