The Global Bull Takes A Breather 5

I do find it encouraging that the broad-based MSCI Emerging Markets Index not only bounced off of its 200-day moving average, but also recently crossed its shorter-term, 50-day moving average. This indicates that (1) the sharp sell-off notwithstanding, the long-term upward trend in emerging markets remains technically intact and (2) global markets, at least by this measure, have resumed rising.

iShares MSCI Chile Investable Mkt Idx (ECH) ended the week slightly down. Chile’s economy has suffered tremendously from the earthquake, with initial estimates of the damage rising to $30 billion. That said, the remarkable resilience of both Chile’s buildings and stock market during the earthquake — compared with those in Haiti or even Japan during the Kyoto earthquake — stand as a metaphor for the strength of the country’s economy.

And, with Chile’s newly sworn-in president Sebastian Pinera, a self-made billionaire, considered more pro-market and pro-business than his predecessor, ECH remains a BUY.

UltraShort Euro ProShares (EUO) fell back last week as the euro strengthened slightly.

Your bet against the euro has been trading in a narrow range, as European authorities scramble to both pressure Greece into reducing its fiscal deficits, and to keep the crisis in the euro from spreading to other weak European economies like Portugal, Spain and Italy.

With economic recovery in the United States far outstripping anemic growth rates in Europe, the U.S. dollar’s strength vis-a-vis the euro is set to continue. This is one of those positions that may remain range-bound for a bit, before the euro resumes its fall. For now, your bet against the European currency remains a HOLD. Raise your stop to $19.80.

Mechel (MTL), your highly volatile bet on Russia, is now up 19% since our initial recommendation. It has been a wild ride, as you came within pennies of being stopped out of this stock in early February. Russia, in general, and Mechel, in particular, is a proxy for global risk appetite. And Mechel’s rise from below $5 at the depth of the financial crisis to over $26 today is perhaps the best indication of how far we have come in the past year.

After rising another 1.34% last week, Mechel has become technically stronger over the past few weeks and remains a BUY. Raise your stop to $23.80 to protect your profits.

National Bank of Greece (NBG) rose 2% last week, hitting highs not seen since late January. With austerity measures that include raising the retirement age from 63 to 65 and lowering government workers’ wages 8%, Greece is slowly addressing the issue of its out-of-control fiscal deficits. Although the Germans still are squirming at the prospect of having to bail Greece out for its fiscal profligacy — some have even suggested that the greeks sell some islands to pay for their fiscal follies — the odds of Greece going bankrupt have narrowed considerably. A bet on Greece’s recovery, NBG remains a BUY.

China North East Petroleum Holdings Ltd (NEP) dropped back slightly last week as the stock has been hit due to some adjustments it must make to its 2008 and 2009 financial statements. That said, all of the accounting adjustments are non-cash in nature and do not impact previously reported revenues, cash balances or EBITDA. Nor do they impact the company’s operational performance. Bottom line? This stock may not do much until this gets sorted out, but the downside is limited. NEP remains a HOLD.

P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.