World Indices – Opportunities in International ETFs

March 1, 2024No Comments

 

Today we are going to [00:00:30] look at charts of World Indices and we want to do some contrast and compare as we look at which countries are worth considering outside of our own little bubble of North America. I want to start off though, by showing you a chart posted on a research report that I just picked up this morning (February 27, 2024). This was a graph showing productivity in the G7 countries. So, this is only seven of the countries we’re going to be looking at today when we look at all the World Indices, but it’s going to give you an idea of how sometimes fundamentals matter and sometimes they don’t.

 

The G7

We’ve seen this with some of the movement on the tech stocks [00:01:30] of late. Fundamentals can get overvalued and people don’t pay attention for whatever reason they just pile into a stock, a sector, or a country. But in this case, we’re going to be looking at big-picture Index charts, which give you an overall picture of the environment, versus any specific industry or stock of a country. I’m going to share screen and the first thing I’m going to show you is this chart that Rosenberg [00:02:00] pulled up, and basically, it’s the G7. So, you’ve got Japan, the US, France, the UK, Germany, the Eurozone in general, and Canada. This is a one-year productivity growth chart and you can see the year-over-year percentage change in growth. Japan is leading the charge, followed by the US.

productivity growth

 

There’s a reason why [00:02:30] Japan’s markets have gone up and there’s a reason why the US market has gone up, although one could argue it’s led by just a few stocks as I’ve harped on before. Nevertheless, there is a productive growth environment in the US, but not as much for the other G7’s, and guess who’s in dead last place and not just by a little bit? Canada is experiencing the worst [00:03:00] productivity growth, by far. It has almost -2% productivity growth over the past year, versus anywhere in the average of -1 to +1.5% for Japan. So, Canada really is falling behind in growth. I won’t launch into a political rant as I often do, but you know there’s a reason, and you know why Canada is [00:03:30] falling behind. “Some governments are just not worth the cost,” as they say.

 

World Indices  

Next, we’re going to take a look at all of the major World Indices out there through in many cases, ETFs that represent those Indices. And, keep in mind that you just saw for example, that France wasn’t [00:04:00] doing too badly, Japan was doing very well, and the US is doing well. Those are things I want you to keep in mind from an economic point of view. From a fundamental point of view, when we look at these stock charts, although they don’t always have a 100% relationship to the fundamentals, there can be some coinciding relationship.

stock chart

 

Canada and the TSX

So, let’s start by taking a look at the TSX. We just looked at [00:04:30] the least-productive economy in the G7’s. So, we’re not including emerging markets in that chart we just looked at, but you can see that that has most certainly shown up in the stock chart. Our government has been crushing the most important industry in the country and it shows. So, if you’ve seen any of my last videos, I pointed out where the US government was [00:05:00] underperforming, and the tables turned literally since Stephen Guilbeault became Ministry of the Environment.

The Canadian Gas Producers are underperforming their counterparts in the US, and this shows up because a lot of our economy is based on the energy trade. We are seeing a breakout by the TSX through about [00:05:30] 20,800, and I’ve talked about this in my blog, but we’re still a long way off from that 22,000 high. What’s interesting is, there’s probably a reasonable chance of us getting there, but you can see on the money flow index – which is the momentum of money flow into – the TSX. Because this is an actual Index chart, not an ETF, you can see that it’s a bit overbought. So the chances are diminishing as to whether we see the [00:06:00] 22,000 highs anytime soon. And this in an environment where a lot of major world Indices are at least hitting – if not exceeding their old highs – at least in the larger economies.

stock chart

 

Chile

(06:14): So, let’s carry on. This is Chile. I have done this video before by the way, [00:06:30] If you look back, you’ll see that I have gone through these exact charts in a prior video. And so some of these horizontal lines,  are lines that I drew back about a year ago when I did my last “World Indices” video. And you can see the lines haven’t changed. So, support resistance on the Chile index is still there. It hasn’t been able to pop through for any material time period. It tried in ’23, but it’s been more or less trapped between 20 and 29. So [00:07:00] as a Trader, I’d be looking at probably trying to buy closer to the lower end of the range if it’s going to stay in that range, that is.

stock chart

 

World Indices in Emerging Markets

Alright, [00:07:08] so we’ll take a look at the next chart, which is the Emerging Markets Overall ETF. So, this is taking countries like Chile, but also adding in all the other emerging markets, (Southeast Asia, Latin America markets, etc.) and throwing them in one bundle. And you can see that [00:07:30] index has been in a consolidation as well. The difference though, is that there was a tremendous downturn on the index and there is a lot of influence by China in this index, by the way. Now it’s been consolidating. Being lifted up, not so much by China as you know, but by some of the other components within the emerging market sectors. So just keep that in mind. But [00:08:00] this on its own is not a bad pattern because if it breaks out, and that’s around on this, this is EEM. So, if EEM breaks around 41½, it looks to be a pretty strong resistance. You can see it goes way back in time, with many multiple touches. The upside is quite substantial. I mean as high as the mid-50s. So, I think there’s opportunity if this index breaks out and I think it’s definitely worth keeping an eye on for all of us.

stock chart

 

EIS Israel Capped ETF

Okay, [00:08:30] here’s one that I really like and I will disclose that we literally just bought a position in this index – actually today as I’m recording this, we’re buying some in our aggressive strategy. Very thinly traded, I should point out this ETF. It’s only got something like $150 million cap, not the market, not the Israeli exchange, but this ETF. So just keep in mind it’s pretty thin. But whatever the case, I mean, you know the story, there’s a lot of war [00:09:00] noise going on in that part of the world, and of course that caused their index to plummet.

But it seems there’s the probability of that war being resolved shorter-term than maybe was originally thought. And, the country has a huge presence in technology and biotech, which is very hot as we know in North America. So, there could be lots of upside. I’m not endorsing buying it, I’m [00:09:30] just saying we do own a little bit of this ETF, not much, but we are legging in. We think there’s a reasonable potential given the amount of risk. So a breakout like this is positive, but there are still tons of risks because what could happen is the war may not go as well as everybody hopes. So keep that in mind.

 

World Indices in Australia, Sweden, and Germany

[00:09:51] Australia. Now this ETF has a massive lid on it. You can see going way back to 2021, it’s never been able to be cracked. [00:10:00] It has had a few counter moves and downtrends, but it always seems to come back to around $24 and then fall. So, this is not an index that I personally would be interested in, especially where it is right now.

stock chart

Here’s one that I do like. Sweden. We don’t own it, but it’s a great-looking chart. It broke out of a consolidation, tested the neckline right there, [00:10:23] and off it goes. Probably lots of potential on this one.

Next, we’re going to look at [00:10:30] Germany, which I have traded before. We got out of the trade a while ago, right around here [00:10:36]. It’s gone a bit higher since we got out, but we like the trade and I would think that it may reach its old highs of around 33 again, which is up here, it’s around 30 right now. Not a huge upside, but, not a terrible-looking chart. Certainly again, contrasting to the Toronto Stock Exchange, a much better-looking chart.

stock chart

 

Hong Kong, Italy, and Japan’s International ETFs

Hong Kong – well, [00:11:00] we know the story of China and Hong Kong suffering right now, and that shows up in this chart. There is some major support around 16½ on this particular chart. It has bounced off of this as you can see multiple times going back to the COVID crash in ’20, the October sell-off in ’22, and here we are again [00:11:22]. It does seem to be trying to break back up again. The trend is down, trying to break up. It’s a high-risk trade, [00:11:30] not for the timid I guess you could say.

EWI world indices stock chart

So, now we’ll take a look at Italy and this is truly a great chart. It had this massive wall at around 31, it broke it, it momentarily failed, but now it’s off to the races and it’s really doing well. [00:11:47] It is probably a little overbought right now, but not a bad-looking chart at all.

We’re going to look at Japan now. Japan, as you recall on Rosenberg’s report [00:12:00] has actually been the highest growth productivity country in the world over the past 12 months, and it shows in the chart. They’re coming into their old highs from a very low point, unlike the S&P 500 which is second in the race for productivity, and it’s at all-time highs. But where the S&P come from versus this particular Index which was down around 47 on the Nikkei. [00:12:33] It’s 69 right now. So that’s a much, much larger rally than the S&P had. So, the connection between the fundamentals, the productivity, and the stock chart shows up again.

[00:12:46] Do I think it’ll get through? Well, it’s probably a little overbought right now. You can see here the moving average down here in the 200 Day/40 week at around 62, and the stock is at 69. That’s 15+ percent, which my rule tends to say that when [00:13:00] things get over 15% for an index, they’re starting to get overbought. I think the Japanese market is a little overbought and might pull back, but eventually, I think it has the potential to break through this lid or this old ceiling [00:13:13]. We’ll see.

EWK world indices stock chart

 

Belgium, Switzerland, and Malaysia’s World Indices

Next, we’re going to look at Belgium. It’s not just good for waffles and rally racing! I love the Porsche GT3 Series Rally races they do out in Belgium. You know, put 911 GT3’s through [00:13:30] their paces with very harsh conditions. It’s really exciting to watch and hear the sound of those magnificent engines.  [00:13:37] Well, Belgium’s also known for cycle-cross racing, which is another thing I am very interested in. I’m a cyclist and they’re probably the most famous place for cycle-cross racing in the world. They’re a harsh conditioned country. And the stock index, as you can see has been trapped at $19. [00:14:00] This is an ETF, so it’s reflective of the Index and it really hasn’t shown any sign through ’23 or ’24 of breaking that. So, I’d give this at best, a 5/10 chart, but still love the country. Who doesn’t like all the great treats that come out of Belgium?

EWL world indices stock chart

Alright, Switzerland. Talk about treats! The land of chocolate, watches, and other fine apparel. Well, these guys are seeing their Index struggle again. The old highs [00:14:30] of ’22 were a bit higher than right now, but you can see on my lines here – that I drew again about a year ago – those support resistance lines are still holding. What might be interesting about this video is, I am using the lines from a year ago and they’re holding. So support resistance is real, it’s real people trading and it does project into the future. And breakouts are very legit too, because as you’ll see on these charts, some of the lines that I drew a year ago, we’re now seeing breakouts [00:15:00] and massive upside. I drew this consolidation a year ago. I drew this downtrend. What I said at the time is it’s got to break out of the consolidation, which it looks like it has.

This is Malaysia and it’ll probably test the trendline soon. I’m going to give this one a 6/10. It’s not something I’d be jumping on, but it’s all part of that emerging markets index we were looking at before. Adding to the upside in [00:15:30] that index, we could see a breakout.

EWn world indices stock chart

 

The Netherlands, Austria, and Spain

The Netherlands has had some good politicians come in. They’re very favorable politicians for progress and all that kind of thing. And it’s showing on the chart here they’re doing well, coming into their old highs. [00:15:48] Would I buy this right now? I really hate buying a stock that’s had such a good move and is now hitting a major old high, which is going to be major resistance, but it’s encouraging.  And I would say that hey, if it came back to this old neckline or anywhere near it [00:16:06], it might be worth a purchase because the trade then to the old highs would be much more favorable. At this point, it’s pretty close so I wouldn’t personally jump on this trade now.

Alright, this is Austria. It’s [00:16:30] broken out. This black line I drew a year ago, and it definitely was acting as resistance and it broke out and is acting as support. It could get back to its old high, which is somewhere around $24, but it’s trading around $21 right now. So, mediocre upside, but not a terrible-looking chart by any stretch.

world indices stock chart

Let’s look at Spain. And again, as a cyclist, that’s a mecca [00:17:00] place to visit for guys like me who love to ride their bikes, it’s been in a very choppy uptrend. It’s supported by the moving average, as you can see, and is actually not a bad-looking chart. So, if you’re looking for international diversification, this is probably one I’d consider as one of many to add to a portfolio, but it’s a good-looking chart.

 

France, Singapore, Taiwan, and the UK

Next is France. And you might recall France was I think number three for productivity in [00:17:30] that Productivity list [00:17:30] we looked at in the beginning of the video, (Rosenberg). You can see it is breaking out of its old highs which is very bullish for this index. A very bullish-looking chart. Everything’s going right for it. You can see a bullish crossover with the moving averages, I think there’s a very good story here with this particular index as far as the technicals go, anyway.

stock chart

Singapore [00:18:00] is a very sideways market. So, we’re again getting back in some of these ‘going nowhere fast’ looking stocks. Taiwan is also a sideways market. Again, remember I drew these lines some time ago. It looks like it’s breaking out. And that would target the old highs, which lie somewhere around 51, and 52. It’s around 46 right now. An okay upside – not bad. [00:18:30]

The UK. This line, again, I drew it a year ago, and you can see the index is still struggling right there. [00:18:42] You could say, “Well, that looks like a breakout”. But honestly, I’d argue with that. It’s a breakout, but not by much. So, it’s not a chart that I’m particularly interested in until we see that breakout be sustained [00:19:00] for a while with a little bit of legs behind it. It’s really not much of a breakout, so I’m cautious on this one. Although it has the potential to be a very good play. But I would not be a new buyer on this index just yet.

 

World Indices Mexico, South Korea, and Brazil

Mexico. Now, this is an economy that is doing well in the emerging market space. They’re getting some business from China given all the stuff that’s going [00:19:30] on in China and politics and stuff. So, there’s a little bit of a favorable attitude towards the Mexican Index. You can see that on this chart. There’s a line that I drew a while ago. [00:19:43] I said, “Oh gee, you know, old highs will become support.” And that’s what’s happened. It’s become support. You could extend this line now. And – but it’s all very positive looking as far as this index goes. So I think this is another one of the attractive charts that I’ve shown you today. [00:20:00]

stock chart

Korea, South Korea specifically, is trapped in that nowhere land where it just can’t break a neckline, which is around $65 on this ETF. When you get a series of higher lows and flat highs, that’s a consolidation, but it’s not a negative thing. And again, if this Index breaks out, you can see, that it attempts at the odd, tiny little breakout, but then it fails. If this Index can legitimately break out, [00:20:30] look at all the air above it before it hits its old highs. The old highs were around $87 to $88 and it’s currently around $63/$64. [00:20:42] Well, what if it breaks out and hits around $67, which to me would sound like more of a legitimate breakout, then my target would be $87. So, a massive potential on this one, [00:21:00] probably worth keeping your eye on, but conditional upon a legitimate breakout,

EWX stock chart

Brazil. Now I will disclose, that we own this one too. We’ve owned this for a while. We liked to play the support resistance pattern on it, and we have traded this multiple times over the years. We entered into it and this time we’re holding, and we’re seeing kind of an attempt to break out. As you can see on this chart, it [00:21:30] did pull back to the neckline, but once again, it’s breaking out, trying to break out. It’s very early to tell you that it will break out. [00:21:38] But Brazil’s Index itself is something like 30%. I may be wrong on that figure. Please correct me if you wish in the comments.

But it’s something like a third or 30% of the index is in Petrobras, which is the oil and gas company. And I’m bullish on oil and gas coming into the spring [00:22:00] and these guys are very overweight in that particular stock. So, it will be interesting to see because if oil moves at all, you’ll see this index move. As I said, we’re in the stock, we haven’t sold it out at resistance like we have a couple of other times in the past. And just based on our view on oil, we are giving oil a chance to move.

 

China, Columbia, and India

And now let’s look at China. We’ve looked at the Hong Kong [00:22:30] index, and there aren’t a lot of differing stories here really. It’s in a downtrend, has found support in the past, is down around current levels, and is trying to bounce up. This neckline that I drew last time I did [00:22:44] one of these videos failed. So that’s going to act as resistance, which is around $24.50. If that breaks, then you’ve got the trendline and the moving average. Okay, so there’s lots of guns pointed [00:23:00] at this index right now. We are currently in a China ETF, and we’re trying to trade it for a near-term move. I don’t necessarily recommend this for longer-term investors, but if you like a little bit of speculative aggressive action in your portfolio, it’s not a bad potential given that it got so oversold just recently. The valuations, by the [00:23:30] way on some of these Chinese tech stocks, are amazing.

So again, it doesn’t matter what you and I think about the valuations, but there are some very, very cheap stocks, especially in the tech sector when you compare them to our tech stocks. And one could argue that the quality of some of the Chinese tech stocks is very, very high indeed. They’re not sluggards by any chance. They’re very good companies. [00:24:00] So, be that what it is. The charts are all that really matter – to me anyway.

world indices GXG stock chart

Columbia broke out, is now pulling back close to the neckline, and probably has the potential to get into the high 20s. Lots of volatility on this sucker. Look at the trades. Your grandmother should not be in this stock – it’s not for the timid.

[00:24:30] So India has been a great story. Again, another one of these world indices emerging markets that’s been taking away some of the market share from China. It’s a growing economy, and they’re involved with more than just labour. They’ve got a vibrant industrial sector, they’re moving into some technology. So they’re a really interesting story. And the index here shows it. I wouldn’t mind it if they pulled back a little bit before I bought it, but it’s [00:25:00] not a bad story at all as far as World Indexes go.

INDY world indices stock chart

 

The S&P 500, and a return to the TSX

This is the S&P 500. So we’re coming to a home base on the behemoth and you can see that it’s crazy overbought just looking at this. There’s the moving average, there’s how high it is. You can’t argue with the breakout. And by the way, I drew this line ages ago. [00:25:23] You can’t argue with the breakout. It’s legit. It’s a bull market to be sure with [00:25:30] the S&P 500. I believe it’s 4,200 on the actual index, and this SPY ETF is 460. It doesn’t matter. So long as the old breakout point doesn’t get cracked, and I don’t think it will. I do think it’ll pull back. Look at that line [00:25:45], it’s just been straight up. It’s so far ahead of its moving average. And, again, we look at some of these world indices momentum indicators like MFI, it’s just out of control high. It’s so high that this market’s so overbought based on [00:26:00] the magnificent seven and maybe a few other stocks that it’s going to pull back at some point. And if it does, there is a massive opportunity. This is a great-looking chart to tell you the truth. It just is overbought right now. So, I’m a fan of what they’ve done. The US shows up second only to Japan as we showed you at the beginning of the video, for year-over-year productivity. And it shows on their chart.  And now we’re back at the TSX, [00:26:30] which as you know is the least productive country in the world, and the chart shows us that.

world indices TSX stock chart

World Indices Conclusions

So, I hope that helps. The productivity stuff is just one of the fundamental tools I read up on. I’m not typically a fundamentals guy, but I do like reading up on it. And, from everything I can see, most of these charts we just looked at lined up with the productivity figures for the seven we reviewed at the beginning. If you had mediocre productivity – it was a mediocre stock chart. [00:27:00] If you had good productivity – you had an emerging stock chart.

So, we’ll be back next week with something different. Thanks for reading, and we’ll keep on giving you new ideas like world indices to explore.

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