In June, I told you to bet against the Brazilian stock market.
Brazil's stock market was up 20% in just three months and within
striking distance of an all-time high. Everyone seemed to think the
rally would continue.
But as I showed, there was "negative divergence" on the chart.
Although the benchmark Brazilian Bovespa Stock Index was making higher
highs, its momentum indicators were making lower highs. Negative
divergence is a strong warning sign a rally is coming to an end. So
Brazil was an ideal short-sale trade.
After my essay, Brazil's stock market did rally for a couple more
months – hitting a new high in August. Since then, though, the negative
divergence has taken its toll...
Take a look at this chart of Brazilian stock fund EWZ...
EWZ is now trading 21% below where it was back in June. It's 30% below its late-August high. (more)
Please share this article
No comments:
Post a Comment