Sunday, June 13, 2010

Stock Market - Everyone Is Bearish!

Over the weekend I did a lot of reading online regarding the stock market and I couldn't believe how many analysts are bearish on stocks.  I must have visited about 20 websites and all I kept reading about was how the market was about to crash. The reasons they gave as to why stocks were about to collapse varied from technical to fundamental. The point I'm making is that EVERYONE is bearish!

As you know I've been posting my reasons as to why I am short-term bullish on stocks and now that I know that market sentiment is so negative, I feel even more confident that stocks will rally. When everyone thinks one way, the market "usually" surprises us by making a move in the opposite direction.

I'd like to also point out which groups of stocks may be leading our stock market higher if indeed we do rally.. It's very early to be picking leadership stocks because the S&P has only rallied for a few days but I'm definitely noticing some leadership taking place which I'd like to share with you. The group of stocks that are showing strength in my opinion are the Latin American stocks and ETFs.




First, lets take a look at the above chart of the S&P500. I want you to focus on where we are trading right now relative to this month's high. . By the way, I think a move above the June 3rd high would confirm a bottom. Anyway, as you can see, the S&P is clearly BELOW the June 3rd high.




When we look at the above chart of EWZ ( Brazil iShares) we see that this ETF has already broken high for the month. Not only that, but we also see a very clear and obvious inverse head and shoulders bottom. In the lower panel the ratio line is rising which means EWZ is outperforming the S&P.




Above is a chart of ILF (Latin America ETF) and we see the same thing, a new high for the month.



ECH (Chile Fund) is also very strong and is making new highs for the month. Notice the trend of the ratio line in the lower panel, it clearly is trending higher.



EPU which is the ETF for the Peru Index Fund hasn't broken high yet but look at that ratio line, it just made a new high for the year! Also notice the rather large symmetrical triangle that is taking place right now.

There are some other strong ETFs from Latin America that are showing strength such as EEM but I think I've posted enough charts to help illustrate my point, you get the idea.

Like I said at the beginning of this post, everyone is bearish and they may or may not be right, but I'm going to follow my charts rather than the crowd which means I will walk the lonely path and be a bull.

1 comment:

Anonymous said...

i and all my 5000 followers are bullish. so u r not alone...

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