Here's What Usually Happens After Prices Break "Support"
How Elliott waves foretold a price turn in this Latin America ETF
by Bob Stokes
Updated: January 31, 2022
Commodities are abundant in South America -- sugar, cocoa, coffee, wheat, beef and corn -- just to name a few.
There's also oil, iron ore and copper. Indeed, Peru and Chile alone supply 40% of the world's copper.
All told, commodities account for more than half of the continent's exports.
However, starting in 2007 and throughout much of the 2010s, South America faced economic challenges as commodity prices fell. Many foreign investors shunned the continent's stocks and bonds.
That changed during approximately the past two years as commodity prices staged a comeback.
For instance, the iShares MSCI Latin America 40 ETF (ILF) approximately doubled in value from late March 2020 into April 2021 in a clear five-wave pattern. If you're familiar with Elliott wave analysis, you know that the completion of a five-wave pattern signals a change of trend.
Our August 2021 Global Market Perspective noted:
ILF has fallen below channel support to begin [a correction].
This forecast served Global Market Perspective subscribers well.
Here's an updated chart, which shows the trend channel, notates that August 2021 forecast and shows the price action which followed:
As you can see, the price of ILF has since rebounded somewhat from the decline.
As of this writing, ILF is up more than 7% for the year versus an almost -9% for the S&P 500--an outperformance of about 16%.
Indeed, looking at the 92 global equity benchmarks ranked by Bloomberg as of January 21, the top 10 performers in U.S. dollar terms so far in 2022 were up 7 - 15% and all are emerging markets--with the top three in Latin America, three in Africa, three in the Middle East, and one in Asia. Third from the bottom of the ranking--that is, #90 out of 92--was the S&P 500.
Will 2022 be the year that a long-ignored asset class--Latin American stocks, and emerging markets in general--finally shines amid a commodity boom?
Follow the link below to read our Global Market Perspective so you can learn the answer.
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