#$brf

[jlfmi]

Identifying The Next Relative Strength Leaders

Stocks that were the quickest to recover from correction losses may be new relative strength leaders going forward.

If you read our piece yesterday, “Are Stocks Out Of The Woods?“, you know that, despite the big rally, we don’t believe the stock market is in the clear just yet following its October swoon. That said, it is not too early to begin looking for potential relative strength leaders in the next rally. One thing to look for in attempting to identify future relative strength leaders is...current relative strength. In other words, look for areas of the market that are performing well now -- especially in terms of how well they have recovered their correction losses thus far.

From an international perspective, we posted a chart yesterday on Twitter highlighting the first global market to return to new highs, post-correction: the Brazilian Bovespa.

Yes, the action in the Brazilian market has been influenced of late by political events. Therefore, we must take the strength with a bit of a grain of salt. That said, the market is back to new highs and far outpacing the recovery efforts elsewhere around the globe. Therefore, while the Bovespa may not be off to the races just yet, it is certainly a relative strength candidate following some consolidation.

What about in the U.S.? We will reiterate -- look for areas that have rapidly recovered back to or near pre-election highs. That should be a good place to start looking for relative strength leaders in the next durable intermediate-term rally. One specific sector in which to look for candidates might be health care.

In a Premium post at The Lyons Share, we lay out several of these potential future relative strength leaders and how to play them.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!

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Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

[jlfmi]

Brazilian Stocks Get A Lift

Brazil’s stock market has recouped its May crash loss and is now hitting 6-year highs.

As practitioners of active investment risk-management, we are always very cognizant of both the risk and reward side of the investment equation. Lately, it seems like our focus has been more geared toward the risk side. That hasn’t been a conscious decision, though. As we have mentioned before, we try to go where the data leads us and very recently, much of the U.S. equity data has been tilted to the bearish side. One area where that is less so is foreign markets.

Look at Brazil, for example. Back on May 18, amid another presidential scandal in the country, Brazil’s benchmark Bovespa stock index was sent crashing. Down over 10% at one point in the day, the index still closed down by 8.8%.

**Related: Here is our May 18 Premium Post, “Special Report: Brazil”, sent to The Lyons Share members, amid the crash, noting key support levels being reached at the time in Brazil and Latin America.

The Bovespa would bounce off of those May 18 lows temporarily, before re-testing them in mid-June. Over the past 2 months, the index has been on a steady ride higher. And, in fact, over the past few days, the Bovespa has eclipsed its previous peaks just south of 69,000 set in February and just prior to the May crash.

So what does this mean for the Bovespa? First off, the breach of the previous peaks opens immediate upside in the index to its all-time highs above 73,000 set back in 2008 and 2010. Beyond that, we may be witnessing the start of a new longer-term up-leg that will take the Bovespa well beyond its former highs.

At a minimum, this development reminds us to keep a lookout all around the world for potential reward opportunities, especially given the possible growing risk in U.S. equities.

In a premium post at The Lyons Share, we lay out our specific strategy for taking advantage of this opportunity in Brazilian stocks.

If you’re interested in the “all-access” version of our charts and research, we invite you to check out our new site, The Lyons Share, where we are currently running our PRE-”FALL” SALE. Considering the discounted cost and the current market juncture, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

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Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

[jlfmi]

Brazilian Stocks Testing Important Breakout Level

Christmas Trees at Rodrigo de Freitas Lagoon - Rio de Janeiro, Brazil

Brazil’s Bovespa stock index is testing the Down trendline stemming from its 2010 top, which it broke above earlier this year.

Brazil gets our vote for the stock market of the year for 2016. The Brazilian Bovespa entered the year in the throes of a 5-year bear market that had sliced over 40% off of the index’s 2010 all-time highs. During the global equity weakness at the beginning of the year, the Bovespa dropped below 3-year support levels, plummeting another 15% in just 3 weeks. However, as quickly as the Bovespa dropped, it bounced back just as fast.

By the beginning of March, it was back up testing its breakdown level, prompting our post labeling the Bovespa “The Most Interesting Chart In The World”. It seemed to us that the index would either fail at the breakdown level, initiating its next leg down -- or reclaim the breakdown level setting up a massive false breakdown. It turned out to be a massive false breakdown.

After reclaiming the key breakdown level, the Bovespa continued its rally in torrid fashion. By July, just in time for the Rio Olympics, the Bovespa arrived to challenge the Down trendline stemming from its 2010 top and connecting the highs in 2012 and 2014. The index succeeded in overcoming the trendline and furthered its 2016 advance until the beginning of November. When all was said and done, the Bovespa ended up rallying about 75% off of its January low.

Since early November, the index has pulled back, which is neither a surprise nor unhealthy. At this point, the Bovespa finds itself back testing the post-2010 Down trendline that it overcame in July, around the 56,000 level.

Just below that level, near 55,000 sits 2 important Fibonacci Retracement levels as well: the 38.2% from its January low and the 61.8% from its June interim low.

So this level should be pretty important support in perpetuating Brazil’s post-January rally. If it fails, it doesn’t necessarily mean that Brazil’s long-term bear to bull market reversal is dead. However, the less giveback the better for the fortunes of the Brazilian market. At a minimum, the Bovespa should at least muster a decent, if temporary, bounce off of this level.

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More from Dana Lyons, JLFMI and My401kPro.

The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

[jlfmi]

Brazil Stock Rally Facing Stiff Test

Up sharply off of its January lows, Brazil’s Bovespa Stock Index is challenging the down trendline stemming from its 2010 highs.

With the Rio Olympics fast approaching, speculation on the competitions is in full swing (e.g., will Brazil be able finish its venues in time or who will win the fight between Brazil and the Zika virus?). Outside of those questions -- and the athletic competitions -- there is another serious test underway in Brazil. After suffering a major (false, in hindsight) breakdown in January, the Brazilian stock market has been on a tear. If there was a global stock market competition for 2016, Brazil’s Bovespa would certainly be in medal contention, having climbed some 50% off its January lows. Presently, however, the post-January rally may be facing its stiffest hurdle yet.

If we rewind a bit first, we see that the Bovespa has been on a wild ride since the turn of the millennium. After an epic 750% rally from 2002 to 2008, the index got sliced by 60% in just 6 months, from May-October of 2008. It was able to hold in the vicinity of the 61.8% Fibonacci Retracement of the 2002-2008 rally, however. From there, it would recover 99% of its 2008 losses over the subsequent 2 years.

Since 2010, the Bovespa has been in a gradually down-sloping channel, albeit with substantive swings within the range. Since 2013, the range has been contained at its lower bound near the 61.8% Fibonacci Retracement of the 2008-2010 rally. Back in September, we dubbed the index “The Most Interesting Chart In The World”, as the major 5-year support was pitted against a potential head-&-shoulders pattern. Thus, the Bovespa seemed to be destined for a substantial move, up or down, based on the resolution of this battle.

As it turns out, big moves in both directions would unfold. First, at the beginning of the year, the Bovespa broke its support/Fibonacci Line/Neckline, leading to a 16% plunge in 3 weeks. That sharp and swift move lower would prove to be all the downside the index would see, however. By early March, the index had recovered the entire loss, prompting another “Most Interesting...” post as the Bovespa was challenging its breakdown area. We now know that the breakdown was a “false” one as it has spurred a further rally of almost 30%.

That brings us to the present where we find the Bovespa running into the Down trendline that has served as the upper bound of the aforementioned post-2010 down-sloping channel.

So will the trendline continue to serve as resistance on the Bovespa? Or will the index manage to continue its rally up through the line? Only time will tell. It certainly would not surprise to see the trendline at least act as temporary resistance as the Bovespa consolidates its recent gains. However, considering the magnitude of the false breakdown, it would not surprise us either to see it eventually break out above the trendline and put in a further extension to the rally. In fact, it is possible that a new cyclical bull market in Brazil has only just begun.

In the meantime, we’ll focus on the index’s reaction to the trendline here. And like early in the year, we may possibly see some shakeout in both directions before the dust settles. Thus, it may be more of a marathon than a sprint and, as such, it may take some time before the gold medal is awarded here.

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More from Dana Lyons, JLFMI and My401kPro.

The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

[mitchzacks]

Are the Rio Olympics in Danger?

It’s difficult to imagine Brazil in a more compromised position than it is today. And, with the Olympics just several weeks away, Brazil seems far from ready to host. With a leader that’s essentially been removed from office (Dilma Rousseff), implications of corruption at the highest levels of government, a recessionary economy, high inflation and a frustrated populace, the Olympics could not have come at a worse time. But, it doesn’t end there. Just this week, 100 prominent physicians, bioethicists and scientists from around the world wrote a letter to Director-General of the World Health Organization to exert pressure on Olympic authorities to move the Olympics from Rio de Janeiro or delay the Games because of public health concerns over the Zika virus. The spreading of the virus is a major concern, and with tourists expected from dozens of countries the risk of outbreak and global spread is acute. This is a story to watch for the sheer drama of it all.

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[mitchzacks]

IMPEACHED: Brazil’s President Faces Trial

Impeached! – well, sort of. After a 20-hour long deliberation in the Brazilian Senate, it was decided that President Dilma Rouseff would be subject to an impeachment trial, during which she must step down as president. After she was removed from the presidential palace, she delivered two impassioned speeches defending herself and calling the trial decision a “coup” and an “injustice.” At the heart of the matter is whether she had any involvement in the multi-million dollar kickback scheme at the state-run oil company, Petrobras, where she served as chairwoman. More recently, there have been questions of whether she broke budgetary laws by borrowing from state banks to cover a shortfall in the deficit and to boost social programs ahead of her 2014 re-election bid. Brazil’s economy has been mired in recession for two years now and it stands to lose plenty more cash with the summer 2016 Olympic Games. To think, the Olympics could be going on while the former president is on trial for corruption and potential impeachment. Things have been better in Brazil, but maybe this is the shakeup they need to clean up corruption and pave the way for more open market growth.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals. This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.

[mitchzacks]

Don’t Cry for Me, Brazil?

Brazil is inching its way to impeaching their current president, Dilma Rousseff. Earlier this week, a committee in the lower house of Brazil’s Congress voted to recommend President Rousseff's impeachment, and the Supreme Court followed suit by denying a request to suspend the impeachment process. Rousseff is on the chopping block for her alleged involvement in the Petrobras scandal and allegedly manipulating public finances. Her approval rating is now in the single digits and Brazilians frequently take to the streets to demand her removal. A vote in the full lower house is expected to take place on Sunday, followed by proceedings in Brazil's Senate, where the chamber could use a simple majority to put Rousseff on trial. Doing so would suspend her position for up to six months, making Vice President Michel Temer acting president.

FREE Download – Zacks Economic Outlook: April, 2016

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.

[mitchzacks]

Carnival Might be the Only Thing Going for Brazil Right Now

Standard & Poor’s downgraded Brazil’s credit status to junk for the first time since 2008, warning it could lower the grade even further in the coming months. A flailing leadership in Dilma Rousseff (whose approval rating has dipped into single digits amidst the Petrobras scandal) and failure to aptly balance a budget inspired the rating cut to BB+. 

Now, Brazil is between a rock and a hard place juggling high inflation with the need to stimulate the economy. Low commodities prices and a modestly growing global economy don’t help. If Brazil can’t get their economic house in order soon, it could experience massive cash outflows from pension funds which will only make matters worse. It’s not near the top of the list of attractive Emerging Markets right now.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.