Time to Do Some Buying

Broad U.S. markets have been advancing since the middle of February, improving the intermediate-term trend of U.S. market to a positive reading. There hasn’t been much in the way of good economic news, but investors seem to have digested the available information about the state of the national and global economies and the fortunes of growth stocks and decided that it was time to do some buying.

The iShares MSCI Emerging Markets ETF (EEM) has staged a powerful three-day rally after seven weeks of choppy base building. EEM soared decisively above its 25- and 50-day moving averages and the 25-day looks set to get back above the 50-day unless there’s a drastic pullback. It’s a little worrisome that the Golden Dragon China ETF (PGJ) that follows Chinese ADRs is still languishing, but we’re getting plenty of confirmation of the new buy signal in the performance of our stocks.

We intend to ratchet up our exposure slowly but surely, which is why we’re recommending half positions in our two new buys. After today’s buys, we’ll be 50% invested, but don’t want to jump too fast or too far. We also have a couple of newly confirmed quarterly report dates (SSW on Monday and CTRP on March 16), with four companies in the portfolio without dates yet.  

The major indexes opened the day down and headed lower, but rallied in the afternoon to finish the day with fractional gains. At the close, the Dow was up 44 points (0.26%), the S&P 500 gained 7 points (0.35%), and the Nasdaq rose 4 points (0.09%). The iShares MSCI Emerging Markets ETF (EEM) gained 36 cents (1.13%).

This is an excerpt from Cabot Emerging Markets Investor, which seeks to capitalize on the enormous potential in emerging market countries. Chief Analyst Paul Goodwin has been a researcher and writer for over 30 years and a member of the Cabot investment team since 2005.

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