Periodically at Emerging Money we look at spread relationships that should be considered. EEM/SPY is the big picture one, but intra market making country spread calls is often highly effective for reasons that are both rooted in fundamentals and also technical/market timing factors.
Tim Seymour
On the fundamental side clearly there can be drivers like: lower inflation, central banks cutting rates, higher commodity prices boosting domestic budget, politics, etc., etc.
All of these factors might make one country more interesting relative to a related country where these macros are weakening/less bullish.
On the trading side only, sometimes you have conditions where one country just gets over extended on the charts and there is an opportunity to sell, often in favor of a correlated underperformed.
We looked at Fund flows, we looked at technical factors on charts for key resistance, old market tops and exhaustion points where market timers say there is a great opportunity to sell strength.
Today we bring you Turkey vs. Russia.
If you look at the iShares MSCI Turkey Index Fund (TUR, quote) vs. Market Vectors Russia Index (RSX, quote) two primary core local indices you can see massive out performance.
TUR/RSX is higher by 30% since September this appears to be getting exhausted. Fundamentals and technicals can support this call. Turkey are Russia have often been seen as relative value trading pair because they are the 2 most liquid markets in Eastern Europe.
The pair also works well as one side does well in commodities.
