Brazil has taken a beating over the past couple of years. EWZ, the popular ETF that tracks the performance of large-cap and mid-cap Brazilian equities, peaked at over $75 back in 2008 before falling nearly 75% over the next 7 years.
The negative headlines out of Brazil have been relentless and devastating.
Brazil’s Crash Landing: Corruption Engulfs Petrobras Amid Economic Contraction and Rising Inflation
Brazil’s Economy Faces Trouble
President Rousseff Impeached and Removed from Office
Brazil Government Won’t Let Rio Go Broke as Bailout Seems Likely
Fitch Downgrades Rio Debt to Super Duper Junk
Brazil Struggling to Compete Thanks to Government, Corruption
Brazil’s Telfonica Tumbles: CEO Leaving and Downgrade
As Crime Wave Hits Brazil, Daily Death Toll Tops Syria
I’ve seen all of these headlines and more over the past two years. I knew that EWZ had dropped by more than half as oil prices plunged for the past two years. I knew that the political situation was unstable at best. I heard reports that suggested the Olympics were a disaster financially for Brazil.
So, as I was flipping through research charts this week, I wasn’t prepared to see this …
EWZ actually triggered an SSI entry signal way back in March of this year … a full month before the S&P 500 triggered its own SSI Entry signal. It has been up as much as 100% this year since bouncing off a strong bottom in January 2016.
The strongest time-cycle for EWZ, the 213-day cycle, is also bullish for the next six months (after absolutely nailing the January 2016 lows).
Many investors would think that since EWZ is already up nearly 100% in 2016 that it’s too late to get on board. I used to think that way too … but I don’t anymore.
EWZ looks to me like it has room to run. It’s been in a stealth bull market for the past 9 months while the headlines bled red. I suspect that in another 9 months the headlines out of Brazil will be gushing with praise for their “surprising” recovery.
That’s when it will very likely be too late to profitably invest in Brazil.
Richard M. Smith, PhD
CEO & Founder, TradeStops