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Who’s Trailing the BRICS?

China is leading the BRICS. Meanwhile, Brazil is trailing near the tail end on relative strength rankings.

As I mentioned last Monday, I was looking for a buy signal on a proxy for China, iShares FTSE China 25 Index. And sure enough, a long-term buy was signaled last week. Granted, shares were looking a little frothy, and I wasn’t surprised to see a little correction, but even with that, the uptrend is clear with this ETF.

Brazil is another story. While some its BRICS counterparts are gaining traction, Brazil is still middling. The country’s stock market is down over -11% so far this year.

And while the Brazilian economy grew at the fastest pace since 2011 in the second quarter, there are concerns about whether that is sustainable: some of the economy’s growth has been based on a build-up of stockpiles rather than an increase in sales, which means production will have to be scaled back at some point.

And concerns about sluggish growth are being met with persistent inflation, which is running at 6.15%.

Looking at the iShares MCSI Brazil ETF, the fund is stuck in a long-term downtrend. A sell was signaled back in early April, and that signal was strengthened when shares took a deep dive in June. While shares breached the 50-day moving average on recent gains, the fund is still trading below the 200-day.

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