#$thd

This is one of a series of Premium posts at The Lyons Share updating our view on specific emerging markets — primarily due to compelling present circumstances.

Thai stocks have pulled back from decades-old resistance to test their recent key breakout level.

2017 saw a myriad of major breakouts in emerging markets around the globe. One such market was Thailand, which we noted in a premium post to members of The Lyons Share last September: “The Best Opportunity In The Equity World Right Now?”. At the time, Thailand’s benchmark SET stock index was breaking above a Down trendline stemming all the way back to its 1994 all-time highs, and connecting peaks in 2013, 2015 and 2017. As the post’s title suggested, it looked to us like an excellent buying opportunity near the approximate 1585 breakout level.

An obvious target that we noted at the time was that all-time high from 1994 near the 1800 level. A few days into 2018, the SET did indeed reach that peak, as we updated in another post: “New Highs For This Emerging Market? It’s About THAI-m”. That doesn’t mean we were buying more Thai exposure there, however. In fact, as we mentioned in the post, we preferred to wait for a pullback to a certain spot first:

“…it is almost a certainty that there will be some sort of pause, consolidation, etc. prior to a sustainable breakout to all-time high ground. And whatever pause that does unfold may take an extensive amount of time to play out. Therefore, we would wait for a more favorable point, in terms of price and time, before adding extensive new exposure to Thailand. How do we find such a juncture?

The first thing we look for is a compelling level of support below that might be most reliable in producing a bounce. It doesn’t guarantee that prices will get there. However, we want to add money at the most favorable risk/reward junctures. Thus, being patient in waiting for such a level is a choice we are comfortable with considering the potentially formidable nature of the present resistance. Where might that level be?

The most obvious level is the September breakout point above the post-1994 Down trendline from which this current bounce was launched. That level, again down around 1580, is about 12% lower. We also always make it a point to locate critical clusters of Fibonacci Retracements below, if any, that would provide natural targets and staunch support. In this case, there are a few clusters that line up nicely.”

Fast forward a half a year and the benchmark Thai index has arrived at that breakout level, hitting a low at precisely 1585  this past week.

As indicated, along with the breakout level in this vicinity, several key Fibonacci Retracement levels are nearby, namely the 23.6% Fibonacci Retracement of the 2011-2018 rally and the 38.2% Fibonacci Retracement of the 2016-2018 rally.

So, will this support hold? Our guess is that it does, at least temporarily. Potential resistance, i.e., profit-taking, points are 1650, 1690, 1720 and 1750 (of course, these levels are subject to change based upon price action).

What about an investment vehicle through which to take advantage of this potential opportunity? In the U.S., the easiest and most direct option for Thai equity exposure is the iShares Thailand ETF (ticker, THD). And while equity ETF’s are often challenged when it comes to tracking its local index, THD also has a potentially key technical level (e.g., the post-2008 Up trendline) in its favor near the current ~$81 price.

In the loooong- term, we are still substantially bullish on the prospects for emerging markets as many of them are working on breakouts of major, e.g., years or decades-long, bases. Once sustainably broken, it is likely that we see new secular, or at least cyclical, bull markets in these markets. And the potential upside in that scenario could be massive.

However, in between that loooong-term and the potentially imminent near-term bounce, we envision more testing/consolidating/base-building for some time prior to a new bull market. That is likely particularly so should the U.S. Dollar continue to rally in the intermediate-term, as we envision.

However, we should at least see a short-term bounce prior to the next bout of weakness.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!

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After a 24-year wait, Thailand’s benchmark stock index has finally returned to all-time highs.

While U.S. stocks are off to a blistering start in 2018, it isn’t the only market seeing noteworthy gains. For example, over the past week we have posted charts on Twitter updating compelling developments involving a number of emerging markets that we’ve been closely tracking in recent years (follow us on Twitter at @JLyonsFundMgmt). Today, we add another update to the list with our Chart Of The Day focusing on the Thai stock market.

The chart highlights a development regarding Thailand’s benchmark stock index, the Thai SET Index. Back on September 1, we issued a premium post to members of The Lyons Share noting a potential major breakout in the SET: “The Best Opportunity In The Equity World Right Now?”. Specifically, the index was breaking above a Down trendline stemming all the way back to its 1994 all-time highs, and connecting more recent peaks in 2013, 2015 and 2017.

With the break of the trendline, we surmised that further significant upside was opened up. As we mentioned in the September post, “the first target after this breakout (occurring near the 1585 level) would be the 2013 highs up close to 1650. The index closed today at 1618, so that target isn’t too far away. That is not the ultimate prize, however. The next target would be the 1994 highs near 1800. That would be a handsome 10% gain from here.”

Fast forward to the beginning of 2018 and we see the SET indeed arriving at those all-time highs set 24 years ago (actually, to the day as of last Thursday).

This is obviously a huge milestone for the Thai stock market -- and worthy of recognition in the form of a blog post and a Chart Of The Day. It also reinforces the theme highlighting the long-term potential of various global emerging equity markets. But is this the best time to get in -- just as prices are hitting 24-year old highs?

Certainly, the breakout last August/September would have been a favorable time to add exposure to Thai equities, as suggested in the TLS post at the time. That was 10% lower in the Thai SET -- and 20% lower in the iShares MSCI Thailand ETF (THD) which is the easiest vehicle for U.S. investors in which to gain Thai exposure. But what is the suggestion now?

In a Premium Post at The Lyons Share, we offer a more in-depth look at the chart of the Thai SET and lay out our game plan for potential investment there.

If you’re interested in the “all-access” version of our charts and research, please check out The Lyons Share. Find out what we’re investing in, when we’re getting in – and when we’re getting out. Thanks for reading!

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After failed breakouts earlier in the year, the charts of the Asian Tiger Cub markets suggest more trouble may lie ahead.

We’ve mentioned several times how price action often times can “predict” the news. That is, the chart of a particular security, index or market may suggest a likely path for prices -- bullish or bearish -- long before any news comes out and is assigned as the ex post facto cause of the move. Therefore, scanning the charts of various markets can, at times, give us a head’s up on a potential source of positive or negative “news” before the market hits the mainstream radar. Such may be the case currently in the Asian Tiger Cub markets -- in a negative way.

In August, we revealed the extensive damage being done in the stock markets of the Asian “Tiger Cubs”, i.e., Indonesia, Malaysia, the Philippines and Thailand. That wasn’t the case earlier in the year as we indicated in that post:

We posted several pieces early in the year on the various emerging markets...as they began the year in promising fashion. While Malaysia was the laggard of the group, Indonesia and the Philippines experienced nice looking breakouts while Thailand appeared poised to do the same. We even suggested that they looked to be in the running early on for “stock market of the year”.

In that August post, introduced the Asian Tiger Cub Composite, an equal-weight composite of the 4 markets. We wrote:

Similar to its components, the Composite started the year out strongly. In late January, the Composite broke above its previous high closing levels from 2013 and 2014 and into all-time high territory. While the breakout looked promising, it did not stick. After reaching its peak in early April, the Composite failed to hold above the previous highs. Recently, it has accelerated its move to the downside. As of today, the Composite is down about 15% from its April highs and sitting at an 18-month low.

We did note that the individual country markets were approaching longer-term potential support areas that could produce a bounce. Indeed the markets bounced soon afterward.

As it is often said (including, by us), a lot can be determined by judging the “quality” of a bounce. That is, if prices recover robustly and quickly, odds are good that the decline was perhaps a counter-trend move and has run its course. However, if the recovery is a shallow one that fails to approach the prior highs, odds are good that it is the bounce that is counter-trend and that further declines are likely to come. In our view, the latter would be an appropriate description of the bounce in the Asian Tiger Cubs since August.

Here is the updated chart of the Asian Tiger Cub Composite.

As the chart shows, after the failed breakout to all-time highs earlier in the year, the Composite broke its post-2009 UP trendline in August, preceding a precipitous decline. Unlike some other markets around the globe, the Composite’s bounce since has been feeble, at best, barely recovering a quarter of the decline. This suggests that the breakdown was a significant event and further declines are likely ahead, eventually.

A look at the individual countries reveals, not surprisingly, a similar picture. After breaking out to all-time highs earlier in the year, the Indonesian JSX Index was unable to hold above its prior peaks. Subsequently, the index broke its post-2009 UP trendline in August, also preceding a precipitous decline. Its bounce too has been lackluster.

Likewise, the Philippines PSE Composite suffered a failed breakout to all-time highs earlier in the year, followed by a break of its post-2009 UP trendline in August. Its bounce since has been especially weak.

Next we see the Thailand SET Index., The SET failed to break out to all-time highs earlier in the year, instead rejected by highs from 2013 and the mid-1990′s. It also has since broken its post-2009 UP trendline. Its weak bounce since is on par with that of the Philippines.

Lastly, the Malaysia KLCI Composite may be a bit more positive or negative depending on the perspective. The KLCI was able to break out to new highs back in 2012. However, after a nice run, it dropped back down in 2014, breaking below its post-2009 UP trendline. Even worse, during the August decline, the composite broke its post-1998 UP trendline, on a log scale. The only positive here is that it was able, for now, to hold its 2012 breakout levels. We say “for now” because it too has mounted only a weak bounce thus far.

As you can see, the stock markets of those countries known as the Asian Tiger Cubs suffered extensive damage in the August global equity decline. Each has broken at least its post-2009 uptrend. Potentially making matters worse, the breakdowns come after several of the markets broke out to all-time highs earlier in the year. Just as troubling is the fact that their respective recoveries have been relatively anemic. While there may be room to move a bit higher in the near-term, these recent developments suggest that greater eventual declines are likely ahead for these markets.

If that comes to pass, expect to hear news waves coming from that region of the world. Whether such news will be related to slow economic growth, China-related concerns, currency issues, etc., we don’t know. But that is the point. The region is well under the radar at the moment in terms of potential trouble spots. However, the charts may suggest otherwise.

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Tiger Cub photo from warrenfyfenews.org.

More from Dana Lyons, JLFMI and My401kPro.

As a lifelong Chicago Cubs fan, there is one unfortunate phrase that I had to learn early on: “wait ‘til next year”. No matter how promising a season may have started for the team, every year since their last World Series title in 1908 has ended in sorrow (1984 in particular, for me). A similar story has unfolded this year for a different kind of “Cub”.

We posted several pieces early in the year on the various emerging markets known as the Asian “Tiger Cubs”. These markets -- Indonesia, Malaysia, the Philippines and Thailand -- began the year in promising fashion. While Malaysia was the laggard of the group, Indonesia and the Philippines experienced nice looking breakouts while Thailand appeared poised to do the same. We even suggested that they looked to be in the running early on for “stock market of the year”. Well, as any Cubs fan can tell you, a lot can happen between April and October -- or August.

In viewing the Asian Tiger Cubs collectively, we constructed an equal-weight composite of the 4 markets.

Similar to its components, the Composite started the year out strongly. In late January, the Composite broke above its previous high closing levels from 2013 and 2014 and into all-time high territory. While the breakout looked promising, it did not stick. After reaching its peak in early April, the Composite failed to hold above the previous highs. Recently, it has accelerated its move to the downside. As of today, the Composite is down about 15% from its April highs and sitting at an 18-month low.

We will note 2 potential positives. First, there is no indication that the secular bull markets that these countries have been in for the past decade has run its course yet. However, that is a longer-term positive -- like saying your team’s farm system is loaded with talent. Secondly, several of the markets are reaching or will soon reach important support levels. We would expect these levels to support at least a bounce in the indices. However, that is only a short-term positive -- like when your team goes on an 8-game winning streak after they’ve already been eliminated.

In the intermediate-term, however, we don’t have much reason to bet on these markets. While things looked promising early in the year, following the failed breakouts, any “market of the year” awards will likely have to wait ‘til next year for the Asian Tiger Cubs.

Even the Chicago Cubs stand a better chance this year...

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More from Dana Lyons, JLFMI and My401kPro.

We have posted articles regarding potential breakouts of 2 of the 4 Asian "Tiger Cubs" so far this year, the Philippines (January 16) and Indonesia (January 22). Each of those markets have since broken out to new all-time highs and, while they still must follow through to prove the breakouts are legit, they have significant potential for continued longer-term gains. Today, we present Thailand as the third possible breakout candidate among the Tiger Cubs, i.e., wanna-be Asian "Tiger Markets" (sorry, Malaysia, but you have a lot more work to do to pique our interests).

After basically quadrupling from 2008 to May 2013, Thailand's main stock index, the Thailand SET, has been in a holding pattern, very similar to the Philippines and Indonesia. The index sold off roughly 25% into the end of 2013, then subsequently recovered most of those losses into September. Since then, the SET has bounced off that level on 3 occasions (including a December 15 scare that sent the index down over 9% on the day before closing 2.5% lower. Such a move should serve as a reminder of the risks of investing in emerging markets -- especially emerging emerging markets.

Since that scare however, the Thailand SET recovered to test the highs it hit at the end of September and early December. It has essentially spent the past 3 weeks consolidating, or coiling, at the level. In the process over the past 20 months, the index has also carved out a possible bullish cup-and-handle formation. This occurs when a market sells off significantly before returning to its prior highs. Subsequently, the market pulls back and pauses briefly to consolidate its gains before eventually breaking out to new highs. While we never anticipate a breakout, this market looks poised to potentially do so.

There is significance in the line marking the September, December and recent tops. It marks the 88.6% Fibonacci Retracement of the May 2013-January 2014 decline. The 88.6% level is basically the last line of Fibonacci resistance. Should the index break above there, the May 2013 highs are just about 3% away.

Despite the May 2013 higher highs, the recent highs that the Thailand SET has been contending with may signify the more important barrier. Besides the importance of the 88.6% Fibonacci level, this area also marks the monthly closing high for the index. Therefore, should the index break through current levels, the May 2013 high may not be as formidable a barrier as it appears. That remains to be seen, however.

Speaking of potential cup-and-handles, the post-May 2013 "cup" in the 1st chart may arguably be seen as a "handle" on a larger scale view. Zooming out, we find the index made its all-time high in January 1994. It spent nearly 20 years forming its possible long-term "cup", culminating in the index's near full recovery to the 1994 level at the May 2013 high (the index is just 5% away from the 1994 monthly high after losing roughly 90%). The pattern since then, as we discussed in the first chart, may be the handle in the 20-year cup-and-handle.

If this read is accurate, there could be major long-term upside potential, should the Thailand SET successfully break out, i.e., the quadrupling since 2008 may only be the beginning. Of course, the proof is in the price. Should the Thailand SET convincingly take out the recent highs, it should have the opportunity for an assault on the 1994 highs, and new all-time highs after that. This has been a tricky index in recent years so we are always on guard for a false breakout as well (those are pretty popular these days). We are on watch, however, to see if Thailand can follow fellow Tiger Cubs, Indonesia and the Philippines into new all-time high territory.

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"Bangkok Clouds" photo by Mike Behnken.

By Todd Shriber ETF Trends

The iShares MSCI Thailand Capped ETF (NYSEArca: THD) is about two months away from celebrating its seventh anniversary and over those seven years, the lone Thailand-specific ETF has endured several bouts of political volatility.

Another one of those bouts could be coming after the Thai parliament today voted to impeach former Prime Minister Yingluck Shinawatra and moved…

Our focus has been on Asia quite a bit in the past few months with several markets scoring big breakouts or reversals. Two markets to add to the list (based on their ETF's) are Thailand and the Philippines. After consolidating this summer, each of them broke out above the key 61.8% Fibonacci Retracement of their 2013 declines. They are now testing that breakout level. If they can hold (or quickly reverse back above) this level, these are attractive long entry points.

iShares MSCI Thailand (THD):

iShares MSCI Philippines (EPHE):

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