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The ETF for Brazil, EWZ, captures the essence of equities over the past several years perhaps better than any other chart. Due largely to its stockpile of natural resources as well a growing population, it is hard not to include Brazil in any serious discussion about global growth. As you can see on a zoomed out weekly chart below, Brazil had a spectacular run up, along with other emerging markets, from late 2002 until the middle of 2008. Along with the rest of the world, Brazil crashed in a ferocious manner over the next year, followed by the obligatory snapback rally off of the major bear market lows. When you consider the mass psychology that will always be relevant to the market, it makes perfect sense to see that pattern: Bull Market–>Euphoria/Bubble–>Crash–>Sharp Recovery.
Since then, Brazil has essentially traded sideways for nearly two years, muddling along in a trading range. Once again, the psychology is consistent with this: After wild rides up and then down over the past several years, the next phase is one of relatively tighter action without too much direction. In light of the recent swoon in world markets, the lower end of this trading range has been probed.
The newsflow when price was probing the top end of this range was largely bullish, with breakout plays appearing to be low hanging fruit. Now, the headlines are grotesquely negative, complete with plenty of traders soundly converted into the bear market camp, looking for another 2008-style event. And yet, if you block out the noise and emotion it is pretty clear that Brazil is still following the script, churning sideways in a large trading range.
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Chess, in you opinion, is it more negative though that its sitting on the lower support and that the MAs are just starting to roll over? During the past 2 years the 200 and 50 could have been considered constructive? but now….? TIA
comes with the territory of having fear back in the market & probing lower end of range
And what is Brazil’s equivalent of the Fed Funds Rate?
Shapely female asses.
Chess…great post as usual.
Also keep in mind EWZ is priced in USD. In local currency terms the Brazilian market broke down almost 3 weeks ago. Same story on EWA.
Thanks
great video….thanks for posting everyday
The great thing about IBC is that you get reminded at the right time about so many opportunities that you looked at previously.
I love the idea of investing in Brazil, it is the anchor country in South America equivalent to the US in size with 1/4 of the world’s fresh water and plenty of natural resources with PBR;s large oil find off the coast If we look at the people, many are from Europe, and of the BRIC countries I would much rather invest in Brazil because it is close to the US and its influence. In other words if cooler heads did not prevail and there was an issue with Russia/China over their proxy Iran then the RC and the I (india due to location next to China) would be at risk for nationalization.
Brazil is also going to host the World Cup and Olympics (positive country pride leading up to it) with a younger demographic population, so good for long term investments if we keep easing. It’s a beautiful country, the women look like the hills, and they have the best walk I ‘ve ever seen.
I was just down there. I can tell you, they have tons of growth ahead of them .. tons.
Love to get EWZ in the low fitties.