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Brazil Stock Market Impressive Breakout

Emerging stock markets are in great shape! InvestingHaven’s research team became bullish on emerging markets already 18 months ago.

Our preference has been the India stock market, also Chinese large caps, and South Korea as well as Taiwan.

We are adding Brazil to that list now.

Even if the Brazilian Stock Market Crash Of 2017 fell 17% in May of this year, and everyone became bearish on Brazil, we said there was no reason to be bearish yet. This is what we wrote:

The chart reveals that the bear market channels are strong in suggesting future price direction. In the last 10 years, EWZ has moved at least 95% of the time within its falling channel(s). Because of that, there is a fairly high chance that EWZ will bounce at its center line at 26 points. That is some 20 percent below today’s levels.

It even did not go that far. The 17% crash did not get much follow through.

Right now, 5 months later, the Brazil stock market is not only trading higher than before the crash, it even breaks out in a very meaningful way. The chart below makes the point: the bear market channel is now invalidated.

What does it mean? Very simple, the Brazil stock market moves higher.

How high? Ultimately, the 2008 peak could get tested, which is 70 percent above today’s levels. But things never go up in a straight line, so we can expect resistance to take place at various levels, with the 60 point level in EWZ ETF (representing Brazil stocks) as the heaviest resistance level.

This is a great example of how the economy follows the market, and that is reflected in recent news items about the Brazilian economy. People sometimes tell us that we are too focused on charts which may be true but not a problem. The market is the leading indicator for the economy, at least most often. So staying focused on the charts is not only good for neutralizing your personal emotions it also has a fair chance of giving you leading data.

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