International Opportunities

It’s true that the US markets may be getting ahead of themselves. At the same time, some of the other world indices seem to be breaking out of base formations. Perhaps it may be a good time to diversify a bit of our capital away from the US market. Keep in mind that the US market does influence most world indices (the US market is the dog that wags the tail).  Still, it doesn’t hurt to add some diversity in what may prove to be better opportunities within our portfolios.  Let’s take a look at a few examples of attractive international stock charts—indices that were out of favor, and now appear in better shape.

 

Europe

A lovely breakout on the iShares Europe ETF (IEV) suggests a $45 target. The German index (below) looks  interesting right now – although the next level of overhead resistance isn’t too far away..

International Stock Charts - a technical chart of the IEV iShares Europe ETF

 

Emerging markets

It’s hard to paint the emerging markets with a broad brush. After all, there is such a diversity in productivity, economic states of development, and chart formations that it’s probably best to buy individual country ETF’s rather than a broad EM ETF- like the EEM chart shown below. Nonetheless, the chart does show some promise given the nice base breakout recently. Overhead resistance isn’t too far away – so I’d probably pick the index apart a bit and buy the better index ETF’s that comprise this one. For example, I quite like Brazil – shown below. This ETF looks to have much higher resistance levels—offering the potential for more upside.

International Stock Charts: a technical evaluation of the EEM iShres MSCI Emerging Markets ETF

International Stock Charts: a technical evaluation of the iShares MSCI Brazil Index

 

Shanghai

Despite worries surrounding Trump’s trade negotiations with China, the Shanghai continues to motor along. I recently listened to an economic commentary with Benjamin Tal of CIBC, an economist who I do hold in high regard. He felt that much of Trumps policies could be accomplished (e.g.- “the wall”, immigration policy, etc). However, it will be quite difficult to change the new economic reality of free trade, and bring back American unskilled labor – forgoing the better pricing that consumers demand. China, emerging markets and India will likely continue to supply much of our low-skilled labor in the foreseeable future. The Shanghai chart agrees with that assessment -it suggests a double-digit return potential in the coming months.

International Stocks: a technical evaluation of the Shanghai Stock Exchange Composite Index

4 Comments

  • Hi Keith,

    Great blog as usual! Would you be able to share your thoughts on the Indian stock market? Do you think the NIFTY 50 (and ZID-t) are breaking out from a consolidation pattern that started around late 2014, early 2015 and would be worth a trade? Or would it worthwhile to wait a bit longer to confirm the breakout and to wait until its closer to the NIFTY 50’s period of seasonal strength which appears to begin in mid June?

    Thanks,

    Josh

    Reply
    • Thanks Josh
      ZID has been something I have traded before–and its a good way to play that market. Currency hedging is a good thing in those markets.
      Right now I’d like to see $21 busted before buying. If that happens, could be very good. overall Bombay stock exchange is also toying with 2014 highs. If it breakout out that would support buying ZID. Let it break, give it a few days to ensure its not a head fake, and that would be a reasonably good entry signal. Put a mental stop to sell if the trade fails and breaks below the $21 by too much if you do enter it via that approach.

      Reply
  • Good topic Keith. I am focusing on the Shanghai index. Your chart is from 2016 and when I look at March 2017 it still has a slow and positive uptrend. My question is what do you see as the point of resistance. The pink line looks like 3400. Currently at ~3250 and if resistance is 3400 that is a mere 4.5%.
    So what do you see as the current resistant point?
    Thanks

    Reply
    • Good question Daddyo
      3400 is old resistance so it has merit, but less so than recent resistance at 3600. If it busts that–its away to the races!

      Reply

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