Tuesday, January 26, 2010

All BRIC markets breaking important technical support

In 2001, Goldman Sachs coined the acronym BRIC that refers to the fast-growing developing economies of Brazil, Russia, India, and China. Since then, the investment world has been following the development of these 4 countries closely. Investing in BRIC countries has also proven to be very successful. Since the global recovery started in March 2009, investment in BRIC countries has significantly outpaced investment in other emerging markets.

When Shanghai's SSECI recently broke below its uptrend line, the question that many investors has been asking is whether this bearish technical signal is something unique to China because of its recent monetary tightening & upcoming long lunar new year holidays. However, after studying the other stock markets of the BRIC countries- Brazil, Russia & India- one will get an impression that these markets are also in critical juncture.

BRAZIL

The Brazil's Bovespa Index (BVSP) has broken below its uptrend line ('SS') at 69000 a few days ago. It closed at 66220 yesterday.


Chart 1: BVSP's daily chart as at 25/1/2010 (Source: Stockcharts.com)

RUSSIA

Yesterday, RSTI closed at 1490, which means that it is now marginally below its uptrend line ('SS'), with support at 1500.



Chart 2: RTSI's daily chart as at 25/1/2010 (Source: Stockcharts.com)

INDIA

Yesterday, BSE closed at 16780, which is now marginally below the support ('SS') (presently, at 16850) of the rising wedge formation.


Chart 3: BSE's daily chart as at 25/1/2010 (Source: Stockcharts.com)

With all the BRIC countries' main stock market indices violating their uptrend lines (or, major support), the outlook for emerging markets as a whole looks very precarious at this moment. AVOID ADDING NEW LONG POSITION UNTIL CLEARER SIGNALS HAVE EMERGED.
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6 comments:

  1. KENNY BLOGTuesday, January 26, 2010 4:04:00 PM

    Good Day Alex,
    Another bank is on sale again.
    This time is Muamalat bank.
    The buyer from Middle East:cash rich, might not stingy as Quek.
    So, Alex, this time U think how many times PBV they will pay for this bank?
    Is it worth to take a look at DRB?

    ReplyDelete
  2. JYTuesday, January 26, 2010 5:15:00 PM

    Hi Alex

    The BRIC have broken their uptrend support lines. A lot of other major uptrend indices have broken the 50SMA except KLCI.

    What is your overall view on KLSE? Is it advisable to continue holding, buy more on pullback or sell?

    Cheers

    ReplyDelete
  3. tehTuesday, January 26, 2010 5:37:00 PM

    Hi Alex,

    My question is almost same as John. Is that we need to hold and wait, or throw 1st, or buy more to lower down the share price.

    wat do u think about the E&O, KPJ, Kencana and TA enterprise?

    Your Question will be very valueble for me. Tx

    ReplyDelete
  4. Alex LuTuesday, January 26, 2010 8:50:00 PM

    Hi Kenny,

    I will give this deal more thoughts at a later date. I doubt the market will be too excited about any deal at the present moment.

    ReplyDelete
  5. KENNY BLOGTuesday, January 26, 2010 9:01:00 PM

    Noted. Thanks

    ReplyDelete
  6. Alex LuTuesday, January 26, 2010 9:04:00 PM

    Hi John & Teh,

    As noted, the major emerging markets as represented by the BRIC countries have broken their uptrend line (or, major technical support). As such, it is very likely that Malaysia will follow suit.

    As noted in my post last Friday, a failure of the KLCI to stay above the 1300 level has in the past led to a sharp selldown (in 2007) at best or a bear market (in 1994 & 1997) or a continuation of a bear market (in 2008) at worst. So, the possible outcomes that the present market may face in the weeks ahead are rather grim.

    If the market has really made a top, then almost all stocks will give back some of their handsome gain. Blue chips will not be spared if the above scenario panned out.

    ReplyDelete