From the desk of Tom Bruni @BruniCharting
Global breadth continues to improve as US stocks press up against all-time highs and many individual countries make multi-year/all-time highs.
Today I want to look at a breakout happening in a market that doesn’t get much attention, Israel.
Here’s the Tel Aviv 125 Index which recently broke out to new all-time highs after failing at 1,500 several times over the last 4 years. Tactically we could see a retest of the breakout area, but from a structural perspective, we’d want to be buying any weakness towards that level if we’re above that level.
Click on chart to enlarge view.
In the US the way to take advantage of Israel is through the ETF EIS, which is currently breaking out of its own base after several failed attempts over the last 18 months. From our perspective, there’s not much to dislike here.
As long as prices are above 55.50 on a closing basis then this breakout is intact and the bias is higher towards 64 (current all-time high sits at 61.75).
On a relative basis, Israel is also holding up well relative to its peers, digesting gains after a strong 6 months in mid-2018. While a relative breakout wouldn’t occur until this ratio gets above 0.886, this consolidation is a constructive one and looks to be setting up for an eventual breakout that implies 15% upside. Let’s take it one step at a time though.
To conclude, we’re keeping this thesis simple. Israel is breaking out of a 5.5-year base as Equities around the globe continue to improve. In this environment, we want to be buying strong sectors/individual stocks (or in this case countries)…and Israel foots that bill.
If Israel (EIS) is above 55.50, then we want to be long with a target near 64.
Thanks for reading and please let us know if you have any questions!