As I suggested last week, my view is that late October’s spike in risk aversion was one of “Mr. Market’s mood swings.” That does not mean it wasn’t annoying, especially as you were stopped out of some of your positions. But my overall strategic view remains that Q4 is not the time to be pulling in your investment horns for any sustained period.
That said, the strategy moving ahead is a delicate one. You will recall that I kept your stopped-out positions on a “virtual watch list,” with an eye toward re-entering them relatively quickly. With the market finding its footing, this week I have two sets of recommendations.
First, I am moving SPDR S&P Emerging Markets Small Cap ETF (EWX), the First Trust ISE-Revere Natural Gas (FCG) and the iShares MSCI Turkey Invest Mkt Index (TUR) back to a BUY. Like many of your other Global Bull Market Alert positions, they have stabilized. Yet because they are still technically oversold, this is an ideal time to re-enter them.
Second, this same analysis applies to two positions you were stopped out of during the October sell-off. That’s why I am recommending that you re-enter your positions in Russian metal and mining giant Mechel (MTL), as well as India’s ICICI Bank Ltd. (IBN). Place your stops at $15.50 and $32.00, respectively. Both positions were as oversold as they had been since the last serious correction in July. Both are also highly volatile positions but will provide you with the greatest rewards if global markets end the year with a bang, as I expect them to.
If you want to play the options on these latter two, I recommend the March $37 call options on ICICI Bank (ITZCK) and the January $20 options for Mechel (MTLAD).
Portfolio Update
The iShares MSCI BRIC Index ETF (BKF) jumped 5.4% this past week, as the big four BRIC markets came roaring back. With this position still off its record highs, BKF remains a BUY.
The iShares MSCI Chile Investable Market Index (ECH) closed at a record high for the year of $50.43 on Friday, as Chile proves to be more robust than most of its other emerging market counterparts. ECH remains a BUY.
The iShares MSCI Israel Cap Invest Mkt Index (EIS) jumped over 2.6% last week as it broke through the $50 level once again. This tech-heavy index remains a BUY.
The iShares MSCI Hong Kong Index (EWH) rose 1.8% last week as emerging markets found their footing. With the Hang Seng Index up over the 22,000 level in overnight trading in Asia, Hong Kong remains a BUY.
SPDR S&P Emerging Markets Small Cap ETF (EWX) provides you access to 279 different small-cap emerging market stocks, including Taiwan, China, Brazil and India. I am moving this volatile bet on emerging markets back to a BUY.
First Trust ISE-Revere Natural Gas (FCG) jumped 2.2% last week as U.S. markets recovered. This position is technically oversold, and ideal for re-entry. I am moving it back to a BUY.
The iShares MSCI Turkey Invest Mkt Index (TUR) rose 3.22% last week, as one of the world’s most volatile markets resumed its upward trend. Turkey is now back to a BUY.
P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.
