Is this the Chart of the Decade?

There’s a lot to talk about these days in the charting world, both long term and short term. But today I wanted to bring up one of the more interesting transitions in money flow that I see out there. In case you didn’t know, for most of the last decade, Latin American stocks consistently outperformed much of the developed world, specifically outside of North America. But I’m pretty sure this is now changing.

The MSCI EAFE Index (Europe, Australasia and Far East) is designed to measure the performance of developed markets outside of US and Canada. There are 22 counties including Australia, Germany, France, Japan, Sweden, & UK.. On the other side, we are looking at the S&P Latin American 40, which consists of 5 major Latin American Markets: Brazil, Peru, Chile, Colombia, and Mexico.

The vehicles we’re using are iShares $EFA and iShares $ILF. Here is a 10+ year weekly chart looking at what I consider to be a huge base and potential bottom:

We’re seeing a 4-5 year bottoming process that is typical of what is necessary to turn such a strong trend around. Momentum turned up a long time ago, as we can see in the Relative Strength Index below. And also notice the 40-week moving average now turning higher in favor of EAFE over Latin America.

One of the reasons I find this chart so interesting is really because of the potential upside. We brought up Japan and Europe recently. And even though Mexico looks good on an absolute basis, it appears as though stocks in developed nations (outside north america) as a group seem poised to outperform going forward.

I hope you find this one as fascinating as I do



MSCI Global Equity Indexes (MSCI)