Overseas stocks are reacting well to China’s newly released reform plan as the Shanghai Composite was up 2.9% and the Hang Seng is also up 2.7%. Stocks in Europe are also higher but not nearly as strong, though the MSCI World Index reached its highest level since early 2008.
The US futures are a bit higher in early trading as they try to add to last week’s gains. In the weekend review of the technical outlook, I pointed out that the weekly analysis showed no signs yet of a top but there were some troubling divergences in the daily studies.
The close Friday may hold the key as a weak close could set the stage for the most meaningful correction since the 6.8% drop in the Spyder Trust (SPY) from May 22 to June 25. Such a loss would keep the SPY up over 20% for the year and decrease the too-high bullish sentiment. It could also set the stage for a nice year-end rally.
The three global ETFs featured today have not done nearly as well as the Vanguard MSCI Emerging Markets ETF (VWO), which is down 4.3% and the iShares S&P Latin America 40 Index (ILF), which is down 9.4%. The Vanguard FTSE Pacific ETF (VPL), which has a 55.1% allocation in Japan has done much better, up 18.8%.
I would not be surprised to see these ETFs hold up better if the US stock market does correct and they are three of my favorite global picks.
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