Something for the Weekend – Brazil Reversed (Huge Gains)

I expected the Rio 2016 opening ceremony to be a bit more Benny Hill than it was. Brazil is a country where gender stereotypes are revered. Femininity is celebrated, not denied like it often is here in Northern Europe. There’s a football league in the north east of Brazil where each team chooses a beauty queen as a mascot for the season. Like football for men, modelling is a way for girls to get up and get out of a hard existence, so there’s a huge number of entrants and Brazilian girls are on average more beautiful than most. At the end of the league part of the season, the top teams go through to the final stages and there a few slots decided not by the teams’ performance, but by a challenge of the beauty queen mascots of all the non-qualifying teams. Yakkety Sax anyone? I think it’s rather charming actually, and harks back to a time when we didn’t live in self-imposed gender tyranny and aspire to androgyny.

I wrote about Brazil last October in a piece called Brazil Reversal. The Brazilian Real was at a high point around R$6 to the pound. There was a lovely reversal signal and I called it. “It looks like an exhaustion rally, and there’s not much support on the way down until we get to the 3.6-4.0 range. Nice looking stochastic as well, crossing over downwards.”

So where are we now, nine months later? Just around 4.2. To show that politicians don’t really have much impact on the economy, during this time the Brazilian President faces an impeachment trial and the government virtually collapsed. That against the backdrop of more civil unrest than Brazil has seen in a long time. Did you hear the boos at the Rio 2016 opening ceremony when the federal government was mentioned? I can’t imagine any of that has strengthened the currency! The global economy operates largely in spite of politicians and governments, not because of them. But in some ways we don’t even care when looking at a technical set up like this. The chart tells us what to do.

I also picked out the db x-trackers MSCI Brazil TRN Idx ETF (LON:XMBR). “It’s found support, at least for now, at the low of ’09. It too has a hammer candle, and could be poised for a reversal.” And reverse it did. Up now from that level around 15.5 to over 28. Note the MACD rising against a lower low on the price chart at the beginning of 2016. That’s a nice reversal signal. This is a monthly chart and you wouldn’t really get into a trade on a monthly chart. But to see the big picture it’s important to zoom out.

Apart from the camaraderie of Brazilians worldwide, speaking Portuguese has another useful advantage. I don’t do well with authority and rather than argue with it I just say “Sou brasileiro, eu não entendo nada, meu!”(I’m Brazilian and I don’t understand you, mate!) Mostly they go away then and leave me alone. Although there was this one time when I was in a Brazilian club doing this, and the guy concerned came out with such a torrent of racism that when I phoned the club the next day to report the incident he lost his job.

One of the funniest things I heard in Brazil was a guy saying to his friend “não me chama ‘my brother’ meu irmão”, which means “don’t call me my brother, my brother”. You can’t make this stuff up.