Our Thoughts on Emerging Markets Pricing EEM & EWZ

Emerging-market equities (EEM & EWZ) are often able to achieve dramatic gains even when U.S. equity indices have already begun what will eventually become a bear market, much like in 2007-2008, emerging market equities still usually decline on days when U.S. equities experience significant losses but not to the same degree. However, when they rebound it is much stronger than …

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IWM is underperforming SPY

The repeated underperformance of small-cap equities versus their large-cap counterparts is alarming. The Russell 2000 has been dramatically underperforming, as IWM (the ETF which replicates Russell 2000) has not been able to reclaim the net new high. This new high, at $120.64, was reached just after the March 7, 2014 U.S. employment report in the pre-market session. Since then IWM …

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Emerging Markets, EEM and EWZ

Investors are moving back into emerging-market funds and it is not due to their great research. They are just chasing after recent outperformance and will continue to do so as U.S. equities slowly retreat while BRICs and related assets surge.

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Bad news is always easy to find near the bottom. The Emerging Markets prepare to turn: EEM & EWZ

Nearly all market fluctuations are driven by emotions, not by fundamentals. Therefore one key to long-term success is acting consistently in the reverse direction of the most psychologically extended market moves. In recent days, some emerging-market indices and funds have fell to their lowest points since the summer of 2009. As a result, we are experiencing growing divergences and probable …

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The sharp currency decline in the emerging markets is a good thing

Currently many established emerging markets (EEM, EWZ, RSX) have been trading near four-year lows, thereby causing them to exhibit classic fundamental signs of undervaluation. They also have experienced sharp currency declines, making their local wages much lower when measured in U.S. dollar terms. This last happened in the first quarter of 2009 and greatly improved the profit margins for such …

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Irrational disparities of Emerging Markets (EEM) relative to the S&P 500 (SPY)

Emerging markets (EEM), particularly countries such as Russia (RSX) and Brazil (EWZ), have been trading near four-year lows, causing them to display classic fundamental signs of undervaluation. Michel Gayed has recently written a very intelligent article about the historical disparity of SPY and EEM: 1998, where are you? Generally, the greatest and most irrational disparities lead to the most substantial …

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Commodity-based ETFs, such as EWZ, XIU, EWA and RSX, will be in the spotlight

Cyclical securities will capitalize upon their all-time record undervaluation relative to high-yielding assets by staging their strongest rallies during the next half of 2013 and into the early part of 2014.

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The most overbought ETFs: IYR, XLV, XLP, XLU and IYZ

The Majority of today’s investors don’t believe that they’re going to lose even ten percent of the money they have invested in defensive stocks and ETFs, even though they have just experienced that kind of loss in IYR, XLU, and IYZ. These latter ETFs and their component stocks have become so overvalued that they could drop by half and still …

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Our thoughts on Gold mining ETFs

Precious metals are currently down in value due to the fact that flock investors prefer stocks right now. Wall Street is driving the wall of money at present, expecting better growth and earnings. Gold mining shares and their ETFs, such as GDX and GDXJ, typically do not have a positive correlation with the overall equity market. They often tend to …

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The Market does everything in its power to fool flock investors

All of our positions have performed extremely well on an absolute basis. This is mostly due to the fact that we vigilantly purchased very close to absolute lows. We did this via our ladder trading strategy during market panic days, including the fiscal cliff panic in the middle of December.

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