World Market Update
Checking in on key ETFs for Europe, China, Brazil, Malaysia, and US stocks.
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I was asked yesterday to update my view on the world markets. As long-time readers will know, I turned positive on Europe in November last year, when no one was interested because France was having elections and no one wanted to get in the way.
At the time, I used EWQ, an ETF to be long the CAC-40, but I switched to using VGK to encompass all of Europe. My measured target on VGK has been in the low 80s, and for now, I do not see a reason to change it. I would like to see it correct a bit rather than just the sideways chop it has seen for the last few weeks, but aside from that, I would wait for it to get to the target. It feels a bit late to be buying it right now for my taste.
When it comes to KWEB, an ETF to be long Chinese Internet stocks, it’s been much more of a trading market there. I don’t love the chart, but in that 32 area, it should find support and rally.
EWZ, an ETF to be long Brazil, has also been highlighted over the last few months, especially with that big fat dividend. I do not have a target for it, but as long as it stays over 26-ish, I view it as a stock trudging upward.
Another non-US ETF I have recommended has been EWM, to be long Malaysia. It has not fared as well as some of the others however, in this 23-24 area, it has good support into this pullback. I find Malaysia tends to do well if semis do well. And yes, I know everyone associates Taiwan with semis, but Malaysia’s chart has some similarities.
As for our market on Tuesday, we got the rally in the 493. And boy are folks getting bullish. At least anecdotally, that’s how it feels to me. Statistically, I don’t see much change. Perhaps the surveys this week will show a marked change when they are released in the next few days.
Breadth was good, but not nearly as good as I thought it might be. So, we’ll watch the chart of breadth, which shows the S&P pushing to a higher high (vs mid-May) while breadth is still below that level (blue line). With the market still short-term oversold, we can see if it can do it over the next few days (before it gets right back to overbought)
I was also disappointed in the number of stocks making new highs. Monday saw a nice increase in new highs, but that did not continue on Tuesday, as the Nasdaq had 177 new highs (vs 191 Monday) and the NYSE had 81 new highs (vs 88 Monday and 96 a week ago).
