It’s hard to ignore the strength we’re seeing in some of these emerging markets. When stocks are selling off, I like to look around and see who is still holding up well. We call that “relative strength”. Every day I get to speak with traders at the largest financial institutions in the world. They laugh because when everyone is selling, they get to sit there pressing buy buttons and fill their humongous orders that need to get done while they are accumulating a position.
Remember that institutions who manage $10, $20 – $50 Billion have to buy millions of shares of a stock just to have a small position relative to the overall size of their giant portfolios. It takes time to fill an order: days, weeks or even months. Retail investors can just press one button and get an entire fill whenever they want. Since institutions can’t, we get to see it happening if we look close enough. When stocks are selling off, those still staying green and holding up is evidence of buy side accumulation.
Today I want to talk about some of the emerging markets out there where we’re seeing relative strength. It’s impossible for me as responsible market participant to ignore what is happening in this space. Also, you guys count on me to put in the work and point out what stands out. [Read more…]