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August 15, 2014

Russian Equity Cycle Nears Low

A few weeks ago I highlighted my desire to buy Russian stocks should their stock market manage to set a weekly cycle low in a bullish manner, which is to say without forming a failed cycle. The action has not quite triggered a buy signal, but if last week's low can stick as a cycle low, an entry point should soon follow.

As you can see, RSX is attempting to form a weekly swing low. A swing is a necessary element of a new cycle, but no guarantee of one. Further confirmation would be required. I use a proprietary indicator called TrendBands, shown above and discussed extensively within the Member Letter, to deliver such confirmations. In this case, a weekly close above the UpperBand (green) would confirm a cycle low and induce me to open a long position.

Given the potential for economic damage from the ongoing strife between Russia and the West, a higher high from Russian stocks would be quite a bullish indication. Perhaps our differences are in the process of being resolved, or perhaps Russia's other ties will be strong enough to overcome Western antagonism. Either way, I will just follow my chart and let the news work itself out.


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