I’ve mentioned many times that the US markets are in a bull market, but in the near term are quite overbought. Note on this weeks S&P chart the overbought RSI levels, the extent of the recent move over the 50 day MA, and the rounding over from an overbought stochastics. Visually, you can see a somewhat parabolic looking move by the S&P, suggesting over-enthusiasm for the US markets. Moreover, trailing PE ratio for the S&P is around 19 (long term average 15) and the Shiller PE is around 24 (long term average 16). Now is not the time to commit new money to the S&P. Wait for a pullback, and look to buy at or below1600.
Interestingly, while the US markets are looking a little rich for the time being, many markets remain stagnant – including the TSX 300. While I’m less bullish on the TSX, some of the developing / emerging markets have been looking like they are on the verge of major uptrend. Moreover, they show no signs of being overbought. I’ve joked with people about some of the emerging markets looking like “submerging markets” recently, but there may be a few very bullish opportunities in the making for the observant trader. If you’ve read my book Sideways, you’ll know that my favourite way to buy a sector or market is after a bullish breakout. So, while the following markets are not all breakout candidates (although some are!), they most certainly could be buy candidates now or in the near future. Moreover, they may just end up outperforming the US markets in the coming months, if and when a breakout occurs.
The Emerging Markets index (EEM) is breaking its downtrend. A closer look at some of the emerging stock markets reveals various stories.
For example, India (INP) and South Korea (EWY) are still stuck in a basing patten, while Mexico is in danger of forming a double-top. These are not buy-candidates at this time.
But Taiwan (EWT) is breaking out from a triangle – which can be quite bullish. Malaysia (EWM) is also breaking out – another bullish looking chart. These ETF’s could be on a traders buy or watch list.
As the US markets are currently displaying a greater near-termed risk-return potential, keep your eye on other candidates for both trading and long term investing opportunities.
Nice post, Keith. Ireland also made a nice breakout this year after a 4yr base.
Any thoughts on sectors within the US broad market? Seems to be a shift from defensive to offensive sectors.
The slow shift into some of the more volatile sectors (XMA, XEG come to mind) is unusual for this time of year -given seasonal patterns. But, it is what it is. Perhaps there will be strong rotation into beaten down sectors–a little early yet to make a bold call, but I’m certainly watching.
What are your thoughts on the big reversal days for both GOLD and SILVER. They look like they might be trying to find a bottom of some sort.
it is oversold, and looks to be possibly basing–but too early to call a bottom. Recall we look for a base, then breakout, before we can ever identify a bottom.