Global stock markets have turned skittish even as news about the U.S. and global economy has been improving across the board. The recession in the United States is over; the S&P 500 is at its cheapest in terms of price/earnings growth (PEG) ratios since 1995; and 80% of S&P 500 companies have blown past Q3 earnings expectations.
So why the glum mood? In my view, the last two weeks have been all about Mr. Market’s mood swings, rather than a sign of another impending economic apocalypse. That said, there is no doubt that the suddenness and extent of the pullbacks in your Global Stock Investor positions in the past two weeks have been off-putting.
Recall, you were stopped out of your position in ICICI Bank (IBN) last week for a 23.03% gain. And last Wednesday, you were stopped out of the Market Vectors Indonesia ETF (IDX) for a gain of 16.04%. Both positions were among the highest risk, highest volatility positions in your portfolio.
Technically, the broader global indices have not been this oversold since a similar correction in global markets in early July. All of my favorite technical indicators are pointing toward a market that is ripe for re-entry. Global markets have now gained, however slightly, over the last three consecutive trading days. And past experience tells me that when global markets turn, they turn sharply and they turn fast. That process already may have started with the Taiwanese stock market logging its best gains in a month overnight.
So this week, I am recommending that you re-enter your position in the Market Vectors Indonesia ETF (IDX), at just about the same level you were stopped out a week ago. Place a relatively tight stop at $49.50. Recall that we have re-entered positions before. We were stopped out of Freeport-McMoRan Copper & Gold Inc. (FCX) during the July pullback, re-entered it later, and it has been one of our top performers since then.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) was flat against the dollar this week despite the World Bank raising its forecasts for Chinese growth this year and projecting that the country’s gross domestic product (GDP) would increase 8.4% this year and 8.7% in 2010. The yuan remains a defensive BUY.
Claymore/BNY Mellon BRIC ETF (EEB) fell back this week — although its high weighting in both China and Brazil has kept it relatively buoyant. This diversified bet on the BRIC economies remains a BUY.
iShares MSCI Taiwan Index Fund (EWT) fell below the $12 level as Asian markets pulled back. But with the Taiwanese stocks up 1.97% overnight and logging their best daily gain in a month, EWT remains a BUY.
SPDR S&P Emerging Markets Small Cap (EWX) continued its pullback as emerging markets corrected. This position is now technically ideal for entry. This leveraged bet on emerging markets remains a BUY.
iShares MSCI South Korea Index Fund (EWY) has been a surprisingly weak performer among Asian markets, despite huge index component Samsung announcing a 186% jump in its operating profits in Q3 last week. But with Korea up almost 2% in overnight trading, EWY remains a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) fell sharply last week, but now has bounced for three consecutive days in a row. Global economic recovery, surprisingly strong earnings and a record gold price keeps this position a BUY.
Market Vectors Gold Miners ETF (GDX) rose 3.8% this week as the price of gold leapt to a record peak of $1,093.10 an ounce in overnight trading, a day after the International Monetary Fund announced a massive sale of the metal to India. A leveraged bet on the price of gold, GDX remains a BUY.
Market Vectors Russia ETF (RSX) fell back this week, but already appears to have bottomed. Fourth quarter is all about Russia, so if you have an appetite for risk, RSX remains a BUY.
SPDR Dow Jones Intl Real Estate (RWX) performed in line with global markets, and will recover alongside them. This play on the global real estate recovery is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) ended the week higher as Chile proved to be a relative safe haven during the global sell-off. Unexciting as it is, I am keeping SQM at 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.