Research Excerpts

Where Are US Stocks Headed? Watch Mexico.

Posted on: Tuesday, February 7th, 2012

The following is an excerpt from our February 6th report entitled, Mexican Stocks Meet Our Initial Upside Target.

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excerpted from our February 6th Asbury Alert

In our January 17th Keys To This Week report (access requires subscription) we pointed out a bullish chart pattern in the AMEX Mexico Index (MXY) that targeted an initial +12% rise to 240.

The green highlights on Chart 1 show that our 240 target was met on Friday.  In addition, the red highlights show that MXY is now positioned right below overhead resistance at 244 to 248, which represents the July 1st and August 1st 2011 benchmark highs.

Chart 1

Especially considering the nearly vertical +12% spike higher to 240 in just a little more than two weeks, this resistance makes the Mexico Index particularly vulnerable to at least a multi-week corrective decline before continuing appreciably higher.

Chart 2 indicates why we think Chart 1 is so significant.  It shows that the AMEX Mexico Index and the S&P 500 (SPX) have maintained a tight and stable positive correlation to one another at various intervals since 2006.  

Chart 2

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