I’m going to keep zigging while everyone else is zagging.
US equities aren’t even close to out of the woods.
The bulls were just out here flexing about two green candles. Are you kidding me?
The truth is, this has been a bush league bounce.
I took some shots, but most of them did not work. So, I’m raising more cash today and loading into some short exposure. This is the most I’ve had all cycle.
Let the non-disciplined buy this dip. There is simply no reason to rush in right now. Until the major averages reclaim their key levels, the bears are firmly in control.
I’m more interested in the opportunities abroad these days.
I mean, can we talk about Canada!?
Some of the bases in these international indexes are absolutely massive. They date all the way back to the financial crisis.
And one by one, we’re watching them resolve. Just look at MSCI Germany $EWG, Italy $EWI, and Greece $GREK. They all recently hit fresh decade-long highs.
And then look at something like France $EWQ, Austria $EWO, and Japan $EWJ. They all look similar; they just haven’t left the station yet. I expect there will be massive base breakouts soon.
But there is another reason why I like Canada more than the others right now. Make sure you read my note from the other day. I broke down the importance of the forex component when investing in international equities.
Here’s EWC overlaid with the Canadian Dollar:
CAD is down here bouncing off of support at the same level where major rallies were sparked back in 2016 and 2020. I’m talking about absolute face-rippers. EWC returned about 70% and 130%, respectively, over the subsequent two year periods.
However, this time around things are a bit different.
In both 2016 and 2020, Canadian equities - and in fact, most of the global equities landscape- were coming out of some nasty bear markets.
Today, CAD is coming off those old lows with Canadian stocks in a position of strength.
There is no bear market in Canada. The TSX is consolidating in a range just below all-time highs. EWC is completing a giant base-on-base pattern.
In the past, CAD holding this level helped put a floor in Canadian stocks. This time around, I think it’s going to fuel a breakout.
Canadian stocks are simply checking a lot of boxes right now. If EWC is above those prior-cycle highs and CAD is holding support, I’m long.
