Opportunity in Select Country ETFs

December 8, 2023No Comments

Today I’m going to talk about several country ETFs that [00:00:30] we should be looking at. And, I’m going to roll through quite a list of stock charts. This list is pretty all-encompassing, so there are a lot of smaller markets on the list as well as larger markets. Really what I’ve done is taken a fairly simplistic look by using basic trendline support resistance analysis. I’m not really looking at any of the usual indicators today [00:01:00] that I like looking at, because we have so many charts to go through.

I want to give you an idea of some of the charts that look attractive, and some of the charts that maybe don’t look attractive or are nearing a point of technical resistance and should be perhaps watched rather than bought.  So, let’s take a look at what’s out there in the great big world and see if there’s anything interesting for us as [00:01:30] investors to be buying. Today is November 28th, so as usual, you’ll be seeing this video about a week after I record it. So, keep in mind that the charts I’m looking at are as of today’s date.

Country ETFs – Brazil

I’m going to start with Brazil, which we hold at ValueTrend. We bought it a while ago. I wanted to start with [00:02:00] Brazil because it’s a chart that I can illustrate a concept that you should be aware of if you use Stockcharts.com, which I am using here. So, what you’re seeing is a support line that’s very well defined on Brazil, and a resistance line, and you can see [00:02:30] how precisely that line has been touched over and over and over again, right around 34 bucks. That’s interesting because you might ask, “Why are you still holding this ETF Keith, if it’s hitting your target?” I want to illustrate a principle here with Stockcharts.com and that is, whenever you’re dealing with any stock/index that is [00:03:00] paying a very, very high dividend, then you have to be aware that Stockcharts builds that dividend back into the price and it distorts the chart.

I find this a real fault with Stockcharts, but you can actually change that, and I’m going to do that right now by putting an underscore before the trading letters. [00:03:30] Now, I normally don’t bother with this because most stocks and most ETFs don’t pay huge dividends. You do want to do this when you’re looking at things like banks and utilities, but it just so happens that the Brazil ETF is currently paying a crazy high dividend.  As an investor in it, I don’t mind  but it’s pushing 8%. So, [00:04:00] with that in mind, if we put this underscore and we change it, take a look at how it differs.

 

So, you can see that the chart does have a very defined support level around $26, but it’s been in declining peaks rather than that very flat look on the chart we just looked at. I feel that this country ETF could [00:04:30] possibly break through. It does have some resistance at $34 like the chart we just looked at, but this is over the same period and yet you can see that there have been higher peaks in the past pushing $40. So, I just wanted to show you that we are still long this stock because it looks to us like it may have a good shot at breaking $34. Now, if it doesn’t break through, then we’ll be selling because if it starts to round over, we know it’ll back down to $26 again.

But, [00:05:00] keep this in mind, whenever you have a super high dividend ETF or stock like Brazil. I started with this chart because it’s the only one really where I could show you the difference when taking out the dividend – it’s not quite as cut and dry as it appears.

China

So, let’s go on [00:05:30] to China. You can see that we started buying a couple of Chinese stocks – well one in particular – and we also bought a China ETF, the BMO one. We do not own this particular ETF, but the concept you can see is there, and that is that China has been a bit of an underperformer, just to put it very mildly – [00:06:00] since the beginning of ’21. And, yet you can see that it seems to be finding support at an old support level that’s gone back to 2022.  Taking out the October ’22 lows that most markets across the world experienced, you can see that there’s been a fair amount of support on this ETF at around $25. [00:06:30]

So, we are trading this for an aggressive trade within our portfolios. We are looking mostly at the technology stocks because they’re so cheap, and we agree that China has a real problem in its real estate market. It’s a very over-leveraged, overbought, and a bit of an emergency they’ve got on their hands. We feel that the tech sector may not be quite as affected. [00:07:00] And yet from a chart perspective, it does look very similar to this chart because they’re big holdings in most of the ETFs and indices that represent China.

 

We’re taking a little bit of a small but hopeful gamble that we’ll see at least the return to the top of the trendline and maybe a breakout based on valuations. Just keep in mind that from most perspectives it’s been in a downtrend, it’s now [00:07:30] in a base, and it’s not making any lower lows. That’s how you tell it’s not in a downtrend anymore, but it’s way early.

I would recommend if you are looking at China as a potential purchase, you don’t buy it unless it breaks this trendline and takes out the last high, which is probably somewhere around $30. So as I said, I’m taking a little bit of a gamble on the country, but I’m being very specific with a couple of stocks that [00:08:00] I like. I wrote a blog on this recently, so you can look at my blog that covered China in mid-November.

 

Country ETFs – Columbia, India, Chile, Mexico & Australia

So, let’s just quickly rip through the balance of the ETFs because I don’t hold positions in most of these, and I have no interest in these beyond their technical appearances. So, this is Columbia. You can see that Columbia has been moving in a support resistance [00:08:30] zone back in 2020, and then through ’22 to the current period, there’s been a bit of a support resistance zone, same area, which seems to be 18.5 to 22 or so on the chart.

It’s near the top of that range and I have to wonder if it’s maybe going to run out of steam soon. Now, India has done quite well in [00:09:00] the recent year. It had a nice bump at the beginning of ’23 along with a lot of stocks on the North American exchanges, but it’s consolidating now. It moved out of a bit of a long-term sideways consolidation.

I talk about these consolidations in most of my books and videos and whatnot. You get these periods, it looks like it broke out, but it’s stalling right now. So, I’m going to give this chart a 5/10. And Chile, [00:09:30] you can see, the market is stuck in another one of these sideways ranges, 20 to 29, let’s call it. It had a few spikes over that level. It’s about two-thirds of the way through that range, with declining money flow. So, I suggest that maybe it could move to the top of the range for those who are speculatively inclined, but it’s not a chart that I’m particularly [00:10:00] interested in.

Emerging Markets

Whereas the overall emerging markets chart, which includes things like Chile and Brazil and everything else we’re going to be talking about today, Mexico, if you buy the overall index, it has a better-looking chart and that’s because some of the stronger movers like Brazil have pushed it high. So, if one were to own this ETF, one would target 42. It’s about halfway through their range. There are actually [00:10:30] in the ETF that represents the emerging markets.

We have a small position in our equity platform and it’s similar to this particular ETF. We own the BMO one, but again it’s probably halfway through a trading range and you have to keep your eye on it because it’s probably a sell sometime soon.

Australia

Okay, let’s look at Australia. Australia [00:11:00] just elected – no, sorry, I’m wrong with Australia. It was New Zealand that elected a new Prime Minister or President. He’s a conservative and that’s always good because they can tighten up the ship and maybe give the country some fiscal incentive for the stock market to do better. Australia is kind of in a downtrend. It’s touching [00:11:30] the top of the trendline. Personally, I would not like this index. I don’t own positions and don’t plan on it. I really don’t like this chart a whole lot.

Country ETFs – Sweden, Germany, Hong Kong

Now Sweden, we just traded it, and this is one of these trades where we did see some support down here. It did an oversold washout. Look at some of the momentum signals and bought it around 32-33, and we just sold it a couple of days ago (as of the time [00:12:00] I record this particular video), it’s right at an old resistance level. We think that’s all it’s got in it.

Also we own Germany, and really, we’re looking at Germany as a sell candidate pretty soon. We do own this particular ETF at this point, but we could be selling it at any point now because it’s met our objectives, or getting very close to that. We’re looking to see if it rounds over. I am of the opinion that [00:12:30] you may not see us own this ETF much longer. We’ve made lots of money on it though. It’s done well. In fact, my last video was on Germany.

Okay, Hong Kong, same thing. It’s at a support level that has been touched many times since 2020, including the COVID washout. And it does seem to hold that level. There was a break in the lows of the bear market that ended in ’22. [00:13:00] That seems to have held again, and it might just see a bounce. I would say maybe into the $18-$19 range. Keep in mind that the bigger trend has been in a declining trend, but the lows seem to be holding. So, it’s at best a consolidation worth, probably a speculative trade similar to the China trade.

 

Italy, Japan & Belgium

Italy is a country that did elect a conservative [00:13:30] leader recently, and this again has been met with a fair amount of excitement on the stock. I think it’s got some pretty significant overhead resistance coming up into the 34-34.5 area. I don’t know how much it has left in it, but it probably has a little bit more room to maybe make a 5% move. If it can break that old high, that would be very good news. Okay? Very, very, very significant [00:14:00] resistance on the Japanese ETF, EWJ.

You can see this was old support, became new resistance. This is classic stuff. It really needs to break that $63 level. If it doesn’t break $63, it’s still trapped in never, never land. But if it breaks $63, I would target into the high sixties. So, let’s just see what happens on that. I would not be buying Japan right now.

 

Belgium, has some upside potential. [00:14:30] Yes, it’s got a lid at 19, but to buy it at 18, if you’re a real short-term trader, it’s likely to get there. It kind of looks positive at this point. I think it might make it, especially if the US markets reach my targets, which as probably a lot of you that follow my work know, I think the S&P 500 will get to the old highs of around 4,800, and that might push a lot of these indices – including Belgium – up to their resistance points.

Country ETFs – Switzerland, Malaysia, Netherlands & Austria

[00:15:00] Switzerland broke down from a support resistance pattern back in ’21. And that pattern carried on after a brief breakdown and a head and shoulders bottom and now it’s broken that pattern. So, the question is: “Will it enter into that sideways support resistance level?” And if it does – it looks like it’s trying [00:15:30] – then you could probably target 48 on the Switzerland ETF, but I would probably give it a little bit of time to see if it can make it back into that trading zone before I took a position.

 

Malaysia is in a triangle consolidation within the confines of a longer-term downtrend, the fact that it’s making higher lows is encouraging. It tells us this may be a consolidation. I’d really like to see this little triangle broken. [00:16:00] So I’d like to see a break through 21.5. If so, it would target 23. And if the 23 trendline broke and takes out the old high around 23.25, then you could see lots of upside. This is an interesting one. There’s a little bit of noise on this chart, but it might be an interesting trade to look at this country ETFs, especially if you see this lower triangle breakout.

Netherlands

Alright, this is the Netherlands. Once again, another conservative [00:16:30] President was elected and that’s good news again for the stock markets in these countries because you start moving into, sort of ‘business accommodating’ climates. So, I do think that the Netherlands has a big chunk of resistance coming up around 43. If it can break that, then you could see quite a bit higher upside. But that’s an “if”, I don’t know that I would be buying Netherlands right now. [00:17:00]

It’s just got too much resistance ahead of it. Same thing with Austria. Austria has a monstrous amount of resistance that’s been in place since the beginning of ’22, and if that broke, then it would be a very high probability that you would see around that 24-plus area. That would be a nice trade if we saw it, but it’s yet to be seen. You can see on the right-hand side of the chart, there’s the possibility of a breakout. It’s really [00:17:30] early yet we’ll have to see because you’ve seen a couple of these little blips where it just barely moved along the line or above the line and then failed. Let’s see what happens.

Country ETFs –  Spain, France, Singapore & Taiwan

 

Okay, this one is probably one of the most encouraging charts that we’re going to look at in this video, and that is Spain. Look at that breakout. There is a lot of resistance that goes way back to ’21 and it looked like it was rounding over and then boom, it’s broken out. So [00:18:00] now, they again have elected a conservative government recently, and that’s very business-friendly. I know I like to sometimes get political, but there’s a real logic behind this that you get a business-friendly government in place and it’s going to help the market.

It’s going to help the economy, and therefore it helps the market. This is good news for Spain that there’s nothing overhead of it right now to stop this ETF from running. I really do like this chart and I may be buying into it. [00:18:30] I don’t own positions right now, but this is probably my favorite chart we’re looking at today.

 

Okay, France, a big level of resistance around the 38.5 level, maybe even 39 as you can see, really needs to break out. It did try breaking out recently and it failed. I would need a very significant breakout on this chart before I got excited about France. For breaks of 39 with conviction, I’d probably be looking at [00:19:00] it hard though.

 

So, sideways Singapore – just another one of these support resistance levels. And you can see old support becomes new resistance. It’s not a perfect relationship, but that support came in again here. I believe that Singapore – if in emerging markets – can continue doing well, and could be a decent play. It looks to me like it has 19.5 in it. It’s currently trading [00:19:30] at 18, so probably one of the more reasonable charts. We don’t own this position, but if one was looking for an interesting emerging market’s play, it might be worth a look at this country ETF’s.

 

Taiwan is trading in a sideways range. There’s been a pretty nice move lately. The risk is always if China moves in on Taiwan, but it appears that the market is discounting that risk for now. The problem is it’s at an old support, [00:20:00] which became new resistance. You can see it level at around 48.5-49. So, my thoughts are I’d like to see this break before I got excited about it. But it’s interesting because if it did break, then you’d have lots of room up ahead probably to make 10 to 15%. But that’s to be seen. I’m not buying it and I wouldn’t buy it until it broke out.

 

Country ETFs – UK, Mexico, South Korea

 

There is strong resistance at 35 or so on the UK market. It just hasn’t been able to penetrate it. So [00:20:30] keep that in mind. However, whenever you see these stocks that have these big lids on them, if they do break out, it can be very powerful. But I want you to notice, there’s an over-running theme here on a lot of the charts we’re looking at. And that is, a lot of them are approaching lids. Have you noticed that? So, just keep that in mind – this is one of the reasons why, when I start talking about “the stock market”, I often do refer to the S&P 500 in the US markets, but really on a worldwide basis, there’s evidence [00:21:00] to suggest that markets are stuck in a sideways trading range.

 

And you know I’ve talked about this a lot. Craig and I wrote a research paper on this that I’m sure many of the regular readers and viewers of this video have received. If you haven’t received it, let me know and I can send it out to you. Basically, the concept that Craig and I put out at the beginning of ’22 when we wrote this paper is that there’s a lot of evidence suggesting the markets that go sideways.

We wrote that paper [00:21:30] way back here, and lo and behold, that’s what’s been happening on a lot of indices including the North American markets. Look at the TSX, look at the S&P 500. They’re not making new highs. They’ve been all over the map, but they’re not making new highs. So my question is: “Will these markets break out?” If they break out it’s good news, but so far that hasn’t happened.

Mexico

Mexico has been the darling when everything else was falling in ’22, Mexico went up in a big way. [00:22:00] It seems to have found a bit of a lid, rolled over and now it’s on its way to challenge that lid. Will it break it? I don’t know. The one thing I can tell you about Mexico is that there have been lots of negotiations with Mexico because of the heat between China and America. Mexico obviously has been getting the benefit of that heat, and you can see that in the chart.

So again, it does matter when you have favorable political events in the background for an economy and a stock market. This is why [00:22:30] I merge the two sometimes. So, if Mexico breaks out past 65, I think there’s lots of air up ahead, because there’s no resistance, but we’ll see. I don’t think I’d buy it at this point. I think that it might run up to 65, but then you’ve got that lid.

South Korea

There’s another lid in South Korea. This is an interesting one because this is the classic downtrend that turns into a consolidation period. I love these charts. These kind [00:23:00] of charts are fabulous when they break out. Now sometimes you see false breakouts. So, where I drew the line is just kind of aligned. It’s not necessarily the line that you have to see break. I would actually like to see 67.5 break. In other words, get past into the 68-plus area before I bought this. But if it breaks out, South Korea has a massive upside, we’re talking like $85 to the lower level of this zone, maybe even $90 if it hits the upper zone [00:23:30] of the old highs back in ’21.  So, let’s just see if that happens.

 

This again is one of those charts that I really, really like within the mix, but you’ll notice I’m not getting too excited about most of these charts. Most of them are kind of ‘meh’, hitting their lids or looking like there’s some work to be done before I could get excited about them. The South Korea and Spain are the two charts that stick out to me right now as a new breakout. I am not making recommendations. I’m just saying that [00:24:00] charts look pretty good in my opinion.

 

So, we’re back to Brazil and you remember 8% dividend distorts this whole look as we saw at the beginning of the video. So, let’s just wrap up by saying a lot of the world markets are trading sideways. A lot of the world markets have massive overhead resistance coming very, very soon if not already being tested. And so my thoughts are that after any move on the world markets in the next few months as the North [00:24:30] American markets lead the way, as the S&P maybe tests its 4,800 old highs, I think there’s going to be a lot of challenge for many of these indices to break out. And that adds to my opinion that there’s a decent chance of another one of these super long sideways consolidations that we’ve seen through history since the late 1800’s on the markets.

 

So, just keep that in mind, but it doesn’t mean there’s nowhere to go. We saw Spain, and the South Korean market and there are [00:25:00] a couple others in there that I think were worth looking at. I encourage you to go through the charts on your own and make your own decisions. There’s always something you can buy. Also keep in mind, within any of these markets that we just saw that have these sideways consolidations, for example – the Brazil chart that I am in right now with ValueTrend – we’ve traded those swings.  If any of my clients are watching this video, they know we’ve been in and out of Brazil a few times.

 

Bear in mind, [00:25:30] just because the market’s in kind of a sine-wave pattern, doesn’t mean you can’t make money. In fact, I love these markets and you can make lots of money in them. I often think that it’s better than a parabolically rising market because that can only go down, can’t it? So, I hope that video helps. I hope that’s given you some ideas on various country ETF’s and we’ll see you next week. Thanks for watching.

 

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