I’m not sure if the guy in the Dos Equis commercial is Brazilian, but it would be fitting if he was because, in our view, the Brazilian Bovespa is…”The Most Interesting Chart In The World” right now. That is obviously saying a lot too considering the present action within the financial markets. So what is our criteria for that title? It’s obviously subjective, but lots of potential “GOOD” and potential “BAD” certainly makes for an interesting chart. The Bovespa has that.
We have been following the Bovespa (Brazil’s main stock index) closely for several years now. The reason it popped up on our radar in mid-2013 was because it was testing a very crucial line of potential support: the 61.8% Fibonacci Retracement of its 2008-2010 rally around 46,150. It held that level successfully (GOOD), producing a solid 25% bounce.
In early 2014, we were not surprised to see the index return to, in our mind, likely “test” the 61.8% level. It held successfully again (GOOD), producing an even bigger bounce that both eclipsed the previous bounce high and also broke the Down trendline from the 2010 peak (VERY GOOD). At that point, we thought the Bovespa stood a good chance of launching the next leg up in its ongoing secular bull market.
Then BAD stuff happened. After climbing some 40%, the index lost its entire gain…returning, once again, to the 61.8% line (BAD). That left a series of 3 lows near the 46,150 area. And we all know how “triple bottom” theories tend to work out (i.e., NOT GOOD). Lo and behold, however, the Bovespa managed to bounce again, by roughly 25%. That was GOOD AND BAD. GOOD that it rallied, BAD in terms of where it stopped. Once the index began to retrace its latest bounce, a dreaded, bearish chart pattern began to reveal itself. After a full retracement by mid-August of the latest rally, the Bovespa was left with two 25% rally peaks sandwiching the 40% rally peak, i.e., a massive potential head-&-shoulders pattern (VERY BAD). The series of lows from 2013 formed the key potential “neckline” of the pattern.
Now it could be argued that the post-2013 series of lows merely represents a substantial base forming that will eventually propel the index much higher (GOOD). The key lay in the reaction of the Bovespa at the 61.8% Fibonacci Retracement level. If it held, the upside out of the base was substantial (GOOD); if it broke, the repercussions of the head-&-shoulders break (and the Fibonacci break) would be immense (BAD).
During the August 24 mini-crash, we thought we had our answer as the Bovespa dropped some 6% intraday, closing well below the neckline and Fibonacci line. However, as all market technicians know (especially in recent years), it is not the break but the sustaining of the break that matters. And over the next 3 days, the index recovered all the way back to test the neckline/Fib line again. A week later, that is where the Bovespa still finds itself.
Here is the chart:
And a closer look at the pattern since 2013:
Again, why is this so interesting? Because of the massive potential movement of the index – in either direction. I’ve been asked by several people my opinion of the Brazilian market. This is what I’ve been telling them: “I’m confident it is going to move BIG…I just don’t know which way yet.”
In a nutshell:
if the Bovespa fails in its attempt to recover the head-&-shoulders neckline (BAD), it has substantial downside. Not just due to the h-&-s pattern, but the break of the Fibonacci support line that has held it for the past 2 years would be significant. How much downside would the index be subjected to? Well, based just on the breakdown of the head-&-shoulders pattern, a measured move would suggest a drop all the way down to near the 2008 lows. And considering the similar full retracements among various commodity and emerging markets that are highly correlated with Brazil, that outcome is entirely conceivable.
On the other hand, what if the Bovespa recovers the neckline successfully (GOOD)? Well, a false breakdown could be just as positive as a breakdown is negative. And assuming the level holds, a substantial bounce could materialize from it. And given that the recovery would mean another “hold” of the 61.8% Fibonacci Retracement level of the 2008-2010 rally, an eventual new up-leg to the post-2002 secular bull market could conceivably unfold…i.e., new all-time highs.
'So which will it be? Well, like the guy in the commercial, this chart is unpredictable. All we can say is the Brazilian Bovespa is primed to move BIG – we just don’t know which way yet. But it should be interesting.
* * *
More from Dana Lyons, JLFMI and My401kPro


I'll stick with FAZ and FAS thank you.
I'll stick with an FAL.
Right arm of the free world.
This should really make the 2016 Summer Olympic Games an event to remember.
Having the Home Field advantage, Brazil will get the gold medal for theft, murder, rape, fights, shootings, knifings, kidnappings; we could increase the list ad infinitum ....
"Find out what it is in Life you don't do well, and then...don't do that thing"
...The World's Most interesting Man
I almost got in a "confrontation" with that guy in a Mexican restaurant.
Sat down and looked across the mostly empty bar area and some guy was staring at me, I figured no big deal and looked at the menu, looked up still staring at me from across the dimly lit bar. Ordered, still staring at me, hmm, talked a bity to the guy with me, looked over still staring. Ok I'm going over there to see if I know him? his issue? WTF!!!!
Life size cardboard cut out. Time for glasses I guess.
Perhaps lay off the sauce until after you have eaten.
LOL, we're all getting older, booboo.
Fucker. Next time bring a lighter. Or a highway flare.
Ha! I've been doing that all my life.
add perfectly tanned asses
Olympic venues which sicken the contestants.....
Tokyo 2020 already has them beat on that... and every olympics for the next 10,000 years probably.
Add some ERY.
Everybody and his dog is a technical analyst these days.
"Everybody and his dog", has been conditioned to follow the trends of the algos these days
Really?
I'll ask my dog what he sees on the charts.. Wait a minute...
He gave it two sniffs and I got the "huh, let's go for a walk" look
I'll take your dogs response to be 'not worth it, don't get involved either way'
Smart dog.
Also, "I read your chart now you can read my shit like it's tea leaves".
Cool. I see a CNBS contract for your hound...."Bark on the Street"
Has to be better than that Limey piece of shit.
Just because someone calls himself a "technical analyst" does not mean he is competent. Learning how to read charts and actually follow them as opposed to trying to read your bias into a chart differentiates the winners from the losers. Also knowing where to put your stops are important. Reading charts is like playing the odds. There is not exact science but knowing how to manage your money via stop loss and understanding the risk reward of any trade is important.
You're so right. For one thing... that is not a Head & Shoulders pattern. H & S patterns ONLY happen after a very sharp and obvious run-up. That's why they have the word "head" in them... not because they are two flanked by two bumps that could be improperly interpreted as "shoulders". A true H&S is normally a market top... or at the very least they mark a mid-term and very important peak that may or may not be retested again. Also, part of a H & S identification is the volume characteristics throughout the pattern. The author doesn't even show volume. Without that information the validity of a potential H & S pattern cannot be determined.
Having gotten that pet peave off my chest... the improper classifying of this pattern as a H & S doesn't diminish the author's correct identification of the "neckline" as being a very important level. Obviously his conclusions are correct.
Boilerplate.
What happens when the market gaps down below your stops?
Here's a question:
When everyone's using TA, aren't they now printing the chart, as opposed to just reading it - similar to the position/momentum problem in elementary physics, where your attempt to measure one variable changes the other?
Any technique that gives you an advantage will last only until the broader market catches on and starts using it, after which its application is nullified by everyone doing the same thing. So in that sense, people who promote TA are actually ushering in its demise.
When you have something that works, keep it to yourself. When it stops working, sell it.
Best market rule of all: If you're up big, take it off, leave the building, and never come back.
AND the currency has hyperinflated. How about those nominal vs. real gains now!
Inflation is a bitch but don't ask Krugman.
Well it does make them a top draft pick for the Legion of the Boned. What is truly sad is how well they were doing until the politicians started promising a socialist paradise for all......
At the start of the 20th century Argentina was on par with the US as far as prospects for prosperity went.
Then they chose the wrong path and the rest is history.
There is no reason for the huge countries of South America not to be prosperous. They have all that is needed within their own borders.
Needs and wants, too bad wants is winning.....
The desire to live beyond one's means is the original sin. All the bankers do is step up and say "let me help".
Blaming the Devil is not going to fix the problem.
The only power the Devil has is people's desire to do business with him.
How long till the next coup d'etat? By my calendar, Brazil is right on time for their scheduled default. What else is new? What happens when no one shows up for the Olympics or when there will be more coverage on the street battles in Rio than the sports in the stadiums? What better way to publicize to the world the total failure of government. What will happen in Brazil will spread like wildfire throughout the EMs and then the DMs. We are fucked, all of us.
Bovespa = PBR (NYSE) denominated in BRL.
sticking with ZH..no matter what,and no money investment involved..just knowledge,and wisdom
Why any sane currency trader would want to trade BRL, ZAR, TRY ect... is beyond me.
I had a small aud/usd long I was nursing before the Monday flash crash, and it got nuked. I looked at r/r on the trade, and based on the the fact that wave-5 of the year long selloff was possibly looking for a retrace, decided to dip my feet in the water.
That was a 2 sigma (big figure) move.
These currencies that people are speculating-in are making 10-20-30 big figure moves in days. That's not trading, it's buying an expensive lottery ticket. Even if those trades aren't levered.( 1:1) and you're using 2.5% of your available margin, you're still looking at the possibility of nuking your trading account.
Always enjoy your posts Yen, someday I hope to understand them.
I have listened to traders yuck it up about retail fx positions and electronic platforms. "It's just printing money." The volatility of the market, VOL, will always exceed what you can afford to lose. A stoploss is just a vol measure, 1 s.d. 2 s.d. 3 s.d. Or, in other words, whatever bogie you come in with they immediately assume is theirs, via the eventual stoploss. You are not permitted to just ride it out....because that is the business model.
Wow, you got nuked on 1:1 ? Oh my god !
Try with mini account on Metatrader, those mini acoount have only 10,000 $ per lot instead of the 100,000 one !
Chart analyses don't mean much with highly manipulated "markets."
Agree. Traditional technical analyses were based on traditional markets with at least some modest reference to fundamentals. Today we are at extremes with ZIRP, and technicals have become irrelevant, not to mention downright dangerous if you try to apply them, especially on a daily basis. If you have a very long term investment horizon and look at quarterly or yearly charts you might stand a chance - the boundaries of chaos become a little clearer.
To the question, "Will the Brazilian market move big up or move big down?" my best answer is "Yes, whenever."
The probabilities of an up or down movement are equal, especially the latter.
If technical analysis was worth anything more than dogshit on a doorstep, the stupid pricks (or in this case, c**t) who believe in it would be stinking rich using their own funds and would not need to hawk it on ZH.
Technical analysis is interesting only to the extent that any algos are programmed to
follow it.
I may not have a Brazillion but when I do I'll let you know.
The most interesting man in the world is
https://en.wikipedia.org/wiki/Jonathan_Goldsmith
A cool dude - has a house in VT and hangs out, from time to time,
at the Man of Kent, an oasis on the NY/VT border.
I look for him every time I stop there.
As for Brazil, I have been going there on business for the past 20 years. Things have never been worse. Today, you can buy a luxury brand new apartment in Sao Paulo for 30 cents on the Dollar. That is the discount you should be asking on the stock exchange.
$BVSP
http://schrts.co/cb2k04
“I’m confident it is going to move BIG…I just don’t know which way yet.”
I tell you: It's going to move to the right.
right?
looks like a pearl necklace to me
BZQ.
Stay thirsty my friends.
"I do not often use the internet, but when I do, I read ZeroHedge."
Watch it closely.
If it moves slightly lower (or stays around the same sort of price, maybe even rally a touch) and then prices go tight, probablities state a major expanding move down. Cover into either some sort of major level or the 2nd time it really thrusts lower.
However, if it thrusts lower and then goes tight probabilities state that's a fake out move, washing out all the longs so a major rally is ont he cards.
The clue is always when and where price goes tight. So watch it closely.
The guy in the Dos Equis commercials is from Chicago. I saw him on a talk show. The accent is fake and he feels lucky to have the job doing the commercials.
His real name is Jonathan Goldsmith.
He was a minor actor in the 60s and 70s, making appearances in shows like Barnaby Jones, The Rockford Files, Hawaii Five-0, and Charlie's Angels.
Though back then, he was credited as "Jonathan Lippe."
http://www.imdb.com/name/nm0326091/?ref_=fn_al_nm_1
Understand the same - real name Goldsmith. Paging Al Neuman. The only thing better than the Dos Equis ads is a Joos rant. C'mon
Al couldn't find the appropriate Veteran's Today post.
For fuck's sake.
This author had to add "The Most Interesting Man in World" as a prop to make his bullshit story that the Brazillian Bovespa could go up, or...drum roll, it could fucking go down fucking readable.
The fucking ZH editors must be hung over again.
it's a holiday weekend.
"I’m not sure if the guy in the Dos Equis commercial is Brazilian"
No, he's a fucking Jew. Big surprise right.
The only power the Devil has is some people's desire to do business with him.
The proper technicals:
1 3 7 15 31 63 127 ...
vs
1 1 2 3 5 8 13 21 34 55 89 ...
To win you have to pick the correct numerology. Besides the two presented there are others.
The correct one to pick? The one EVERYONE ELSE believes in. It is not mathematics. It is not science. It is economics.