Tuesday, June 15, 2010

HGSI BRIC Analysis ...

Brazil-Russia-India-China (BRIC) stocks are interesting to me because they represent an off-shore opportunity that is loosely coupled with our domestic performance.  HGSI can provide considerable insight to this strategy, if you take the time to set up the screens and observe past behavior.

Rather than spend time walking you through the setups, let me first dive in head first and if you like what you see, you can leave a comment below that you'd like to set up the details and play with the system yourself.

As with all my charts, right-mouse click on the image to open in a separate window or tab.

This is a variant of Jeffrey's 2ac Price & Volume chart.  The modification stems from the addition of the pane above the pricing/MA series -- I have added specific indicators based upon the 65d EMA of the price.

Specifically shown in that 65d EMA slope pane are a
  1. 2d EMA on the slope of the 65d EMA of price (RED),
  2. 8d EMA on the slope of the 65d EMA of price (BLUE),
  3. 13d EMA on the slope of the 65d EMA of price (GREEN)
  4. 21d EMA on the slope of the 65d EMA of price (BLK), and
  5. 34d EMA on the slope of the 65d EMA of price (PURPLE)
The first thing you should note is that:
  1. All of these values are below 0.0 (negative).  This means that the slope of 65d EMA of the stocks (or ETFs) represented in the pricing series index have been falling.  Falling slopes = lower prices.  In general, negative slopes are bearish, and the deeper they are below 0, the more the price series has been in trouble (just take a look at BP).
  2. Look at "the slope of the slope".  In this particular case we have:

    a) the 2d EMA of the slope of the 65d EMA of price (RED) is well above all the other EMAs, and it is moving upward.  Think of this as "pulling" the rest of the slopes up.  This is very-short-term bullish.

    b) the 8d EMA of the slope of the 65d EMA of price (BLUE) is pointing upward.  If we think of this as a car driving forward or backward (with a value of 0 meaning the car is stopped), if the indicator is negative, the car is going backwards, but if THAT slope is pointing upwards, the car is going backwards less fast.  This is short-term bullish, e.g., EMA prices are not losing ground as fast.

    c) the 13d EMA of the slope of the 65d EMA of price (GREEN) is also pointing upward.  Although negative in value (the car is driving backwards), it too has reversed and is pointing upward which is more bullish (the car is driving backwards less fast).

    d) the 21d EMA of the slope of the 65d EMA of price (BLACK) has just turned up within the last few days.  Same commentary as (c) above.

    e) the 34d EMA of the slope of the 65d EMA of price (PURPLE) is still pointing downward.  In our analogy, "the car is driving backwards and going faster in reverse".  This is bearish, and is a warning sign.

    The interpretation of this BRIC index is that in general, BRIC stocks (which comprise the index) are losing ground less fast but because all their EMAs of the slopes are negative, are still losing ground.  Another way to think of this is that *some of the constituent stocks comprising this index are looking good, while others are still looking bad.*  Let's see if we can determine which is which.


One of the powerful aspects of HGSI is the quick ability to generate indices based upon whatever you feel is important.  As you make lists of lists, these indices get "rolled up", giving you a macro picture.  This, in fact, is what you are looking at above -- the BRIC index is actually comprised of the separate Brazil, Russia, India, and China indices.  Let's look at each country by itself.  First, Brazil stocks:

Brazil is almost a mirror image of the entire BRIC picture -- certainly the 65d EMA slope pane discussed above has the same conditions as the entire BRIC picture.  Let's dive into the stocks that I have in the Brazil index and see if there are any leaders.

One way that I do this is to use the Ranking tool within HGSI.  Here's the image, with the Brazil Index highlighted:

As you can see, there are 15 stocks that are out-performing the Brazil index in terms of Relative Strength.  These are further candidates for your consideration.  If we choose the top one (ABV class C), we get a very interesting view when we apply my modifed Jeffrey's 2ac chart:

Here, we have ALL the slope EMAs positive and trending upwards.  This is a very interesting equity -- perhaps a bit over-extended (e.g. wait for an Elder 2d Force Index transition to negative before entering), but still very interesting.


You can do this analysis with each of the BRIC countries, or any list that you create for that matter.  Here are the charts for the Russia, India, and China indices:



India Index:


China Index:


Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.