Brazil’s Stock Market Breakout Might Turn To Bust (EWZ)

Image of Brazil flag flying

From Dana Lyons: Brazil’s benchmark Bovespa has failed to hold its breakout above last decade’s all-time highs.

In 2008, Brazil’s benchmark stock index, the Bovespa, topped out at an all-time high near 73,000. After nearly a decade-long lull, the Bovespa finally clawed its way back to that level for the first time late last summer. After a brief consolidation, the index pushed its way higher into February of this year, reaching as high as 88,000. Through the early year global equity correction, the Bovespa held firm, consolidating again near those highs into May. Then the bottom fell out.

In the middle of May, the index started dropping. Just 3 weeks later, it was back down to the breakout level of its former highs of a decade ago. We wondered if that former resistance level would now work as support. So far, it has not.


As the chart shows, the Bovespa immediately sliced through its former highs. This leaves the specter of a potential “false breakout” on the chart. Especially considering the magnitude of the attempted breakout (i.e., a level of decade-long importance), a false breakout could bring dire consequences.

So is it a false breakout? And if so, what are the risks. Or should this market be given some leeway before making a judgement? In a Premium Post at The Lyons Share, we take a deeper dive into the Bovespa chart and share our analytical view of this key emerging market development.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!

Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

The iShares MSCI Brazil Index ETF (EWZ) closed at $32.05 on Friday, up $0.16 (+0.50%). Year-to-date, EWZ has declined -20.77%, versus a 2.06% rise in the benchmark S&P 500 index during the same period.

EWZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 19 ETFs in the Latin America ETFs category.

This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.