IBOV indicators displaying early signs of recovery? Over the past decade, emerging markets such as the IBovespa (IBOV) have underperformed the U.S. considerably. Recently however economic surprises in emerging economies have begun to show signs of recovery, which historically led to better than expected gains, in accordance with analysts forecasts. During times such as these, compared to the U.S. when Emerging markets begin to show healthy economic data, the Emerging Markets / S&P 500 ratio fared quite well.
For the midterm, providing IBOV can convincingly break, hold and close above the reliable 200 period daily moving average, at (1) we should expect to see a steady price increase with a first target in mind at 99940s followed by 102205.0 in extension. Alternatively, any weakness around these current levels (1) will most likely lead to an increase in selling pressure, where 93360s will be the first stop to the downside followed by 92280s. Below that, good support comes in at 90021.20.
IBOV trade ideas
Brazil's IBOVA beautiful bear flag on the Brazil index. I haven't much to add about that, except that, like the Canadian TSX, the strong counter rally after the June high and subsequent drop has broken the channel from the February high to the June high. Also, very locally, the most recent price action has formed a wedge similar to the one on the S&P 500:
The long-term picture looks like a nice broadening formation. I expect we will eventually find the bottom. I suppose from there we might see a big bounce, but after that, given the number of touches we already have in that formation, it could be lights out. Maybe a scenario such as 40K bounce to 80K then a collapse of the structure? Just a guess at this point.