How US Dollar Weakness Will Impact Stocks
Here is an updated version of the US Dollar Index making new multi-month lows:
We're in the process of a mean reversion in stocks. But it's Latin America showing the relative strength. Here is Latin America vs the S&P500 trying to complete a major bottom:
More specifically, here is Brazil relative to the S&P500 making mulit-year highs:
The relative strength out of this area has been impressive for a while, but with a weak dollar, it is really standing out.
So what's the trade JC? Just give us the damn trade already!
Well, there are a lot of way to get involved. There are ETFs like $ILF and $EWZ which are old classics, of course. But if you're looking for a little more juice, I like the situation in shares of Freeport McMoRan. Look at the lows in $FCX around the middle of 2017. The rally into early last year was sparked by a nice bottoming process and bullish momentum divergence right around $11:
During the December declines, Freeport broke below those key lows, but is now attempting to recover. Notice how this whipsaw is being accompanied by another bullish momentum divergence. I think if we're above 11 in $FCX we need to be long this space, particularly shares of Freeport McMoRan. I believe 13.70-14 is a good target here tactically, as it represents a key retracement and former support in 2017.
Why does the company capitalize letters in the middle of its name? I don't know. But the risk vs reward is in our favor, so we won't ask questions.
You can find a list of the rest of the stocks we're trading here (Premium)
JC
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