Maestría en Finanzas (UTDT) -Especialista Mercados de Capitales (UBA-IAMC) - Lic. Administración (UBA)
Analista Sr. de Mercados Financieros. Trader. Conductor de After-Market (Viernes 19hs por FM Cultura 97.9) Columnista: Diario Cronista.com, Nosis.com, Saladeinversion.com, Revista Inversión; Finanzas.com, FuturesMag,Investing.com. CapitalBolsa.com.
Docente Análisis Técnico y Psicologia de Mercado en Universidades locales y cursos de Posgrado. twitter: @julianyosovitch
Day by day worldwide investors are getting bearish about emerging economies and their financial markets. Major financial newspapers and magazines post news about international money outflows which are leaving the Emerging Markets (EEM).
Investors, who are selling emerging market stocks and bonds, justify their selling strategy by saying that their fiscal deficits, China´s slowdown and its stock market turmoil together with a stronger dollar and a fall in commodities prices as well as the fear about FED tightening, all represent a huge problem.
All these factors make investors even more bearish about the future of emerging markets and that is why we hear on a daily basis news about the outflows from China, Russia, Brazil and other Latin America countries which, from 2000 to 2012 used to receive international money rather than suffer daily outflows.
In fact, 2015 will be the first year since 1988 that money outflows will be higher than the inflows from emerging markets, representing a serious problem to its currencies and further economic problems to their governments.
The days when everybody would invest in emerging markets are far away in time as well as when the BRICS were an important topic in Wall Street. That does no longer exist; in fact nobody considers BRICS as a good investment anymore.
Does it mean that there are no opportunities there? Not at all. The fact that everybody is bear about EEM represents a very good opportunity for those who like to invest in a contrarian strategy. Contrarians know well that the market always punishes the market consensus, which is actually a very bear one, and sooner or later, the bull market will be back and will remain so until the consensus about the BRICS turns bullish again, as it used to be in 2011.
So instead of joining the international investor’s bearishness on EEM, we should think where to buy (or re-buy) within a long term investment.
The EEM has shown a bull market since 2008 lows at $18 back to the highs seen in 2011 at $50 and from where there started a bear-market returning to the 61.8% of fibonacci at $30 and closing at $33.80 last Monday.
As long as the $30 is not broken, we can still speculate on a further recovery back to $36 in the first instance and $40-$42 later. With a break above $42, the EEM will extend the recovery back to previous highs at $45.80, at least.
The bullish view will remain alive as long as the support at $30 is not broken down and if we see some bearish movements in the near future, it should be limited at $30 and from there the uptrend should be resumed and take the EEM toward higher zones.
Only with a direct break below $30, the bullish view will remain neglected and we will see a further bearish movement towards lower zones, back to $28-$26 and even more depressed front values.
The pessimism around emerging markets contributes to seeing a further recovery because we think that the market will punish the actual bear consensus and we will have to keep on watching the $30 as the main middle term support that will remain alive the bullish view and to keep on expecting a further recovery back to higher areas.