Technicals Point to These Markets as the Best Buys Right Now

Jim Cramer CNBC host

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  • Source: CNBC.com

    Jim Cramer is a popular CNBC host. He’s famous for his large personality and underneath that he is a successful investor. He’s confident, and confidence is important to investors. Cramer is confident that he can find winning trades in any market environment.

    In his words, “I like to end every television and radio show I have with this signoff: “There is always a bull market somewhere, and I will try to find it for you.” I say that because it’s true.”

    One way to spot the bull market that is tradable is with technical analysis, the use of charts and indicators. Doing so, we find that there are a number of bear markets in the world right now.

    Bear Markets Outnumber Bull Markets

    One way to identify a bull or bear market is with a moving average, or MA. When the price of a market or stock is above the MA, the trend is defined as up and we are in a bull market. Closing below the MA indicates the trend is down and is defined as a bear market. The 200 day MA is a popular choice for this analysis.

    Looking at the 200 day MA tells us that markets in Latin America are bearish. Benchmark averages for Brazil, Chile, Peru and other countries are below their MAs. Mexico’s benchmark is near its MA, not decisively in either a bear market or bull market and technicians often advocate following clear signals.

    In Europe, the situation is similar. Benchmark indexes in Italy and Greece are about 10% below the 200 day MAs and in bear market territory. Spain and Russia are close to being in official bear markets which is defined as being more than 20% below a previous high.

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  • The United Kingdom’s benchmark FTSE index is trading above its 200 day MA when priced in British pounds. However, investors in the U. S. trade in dollars. And, when using an ETF available in the U. S. the U. K. is in a bear market.

    EWU daily chart

    The chart above shows the iShares MSCI United Kingdom ETF and the blue line is the 200 day MA. For now, investors looking for a bull market should look elsewhere.

    So far, we’ve eliminated Latin America and Europe as locations of the current bull market. Those are areas that many investors are concerned about for various reasons. Political turmoil appears to be on the rise in some Latin American countries and slow economic growth plagues parts of Europe.

    That leaves us with Asia and North America.

    Asian Markets Present a Mixed Picture

    China is at the center of the news and the possible epicenter of a trade war. That would weigh on a stock market and it is not necessarily surprising to see that the Shanghai Composite is down in bear market territory.

    The next chart shows the iShares FTSE China Index Fund (NYSE: FXI) which is, of course, available to investors in the U. S. The ETF is below its 200 day and MA and in a bear market after falling more than 20% below the highs reached in January.

    FXI daily chart

    Japan is in a long standing bear market with its benchmark stock market index, the Nikkei 225, having peaked in 1989. ETFs tracking that stock market remain below their 200 day MAs.

    One market in that region recently broke above its 200 day MA and could be the location of the bull market that exists somewhere. That’s India as the chart of iShares MSCI India Index Fund (NYSE: INDA) shown below indicates.

    INDA daily chart

    We can see that the index recently broke above its 200 day MA. Of course a pullback is possible but this is a recent buy signal and could be the beginning of an extended up move.

    The stock market action appears to be confirming a recent International Monetary Fund (IMF) assessment which found,

    “India will remain the world’s fastest-growing economy as the country begins reaping the rewards of the ongoing structural reforms, according to Ranil Salgdo, the IMF’s mission chief for India.

    Solgado described India’s $2.6 trillion economy as an elephant that is starting to run. Growth of the world’s sixth-biggest economy is expected to soar to 7.3 percent in the current fiscal year, ending in March 2019, and 7.5 percent next year.

    The current pick-up reportedly follows a drop to 6.7 percent in the previous fiscal year.”

    Economic growth can drive stock market gains and India’s market up turn is consistent with the expected growth.

    Investors should also remember that the United States is growing relatively fast with 4.1% GDP growth in the most recent quarter. This is a rapid pace for the country and all major stock market indexes are above their 200 day MAs.

    Despite the skepticism of many press reports, the United States is in a bull market and when Cramer says that there is always a bull market somewhere, he is correct. Traders could consider increasing exposure to small cap stocks which are often the biggest movers in a bull market.

    The smallest stocks are found in the iShares Micro-Cap ETF (NYSE: IWC) and more liquid small caps are also available in an ETF, the iShares Russell 2000 ETF (NYSE: IWM). The advantage of an ETF is that it provides a diversified portfolio of stocks.

    Of course, following technical indicators and spotting where the current bull market is will take some time to do.  If you are uncertain about your ability to dedicate the required time to trading, there is a TradingTips.com trading service, Triple-Digit Returnswhich uses a very specific system for choosing the right stocks to trade.

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