Leadership in emerging markets continues to expand as the weak Dollar cycle progresses.
This time, it’s Colombia stepping up.
Yes, Colombia... One of Latin America's historically weakest markets is showing leadership.
And that’s exactly what we’d expect in a sustained down-dollar environment. When international currencies and equities take the lead in a bull cycle, the highest risk, highest beta countries tend to outperform their respective regions.
In Europe, we’re seeing countries like Greece and Italy outperform Germany and France.
And out in Asia, despite Japan's stellar performance this year, it’s being outpaced by its frontier market neighbor, Vietnam.
When investors move out on the risk curve in this manner, it provides valuable intermarket confirmation for the broader trends.
In other words, it’s a healthy, synchronized, global rally if the riskiest stuff is leading the way.
Right now, the Colombian Peso (COP/USD) is carving out a multi-year base against the dollar.
That’s a bullish backdrop on its own. But just like we’ve seen across other LATAM markets, equities are the ones leading the charge.
The MSCI Colombia ETF $COLO (formerly trading under ticker GXG) just cleared major downtrend resistance, setting the stage for a massive reversal.
We’re watching the COPUSD cross closely for confirmation, but on the equity side, we already have an actionable level.
For broad exposure, we like $COLO long above 34 with a target of 46.
The trend is a bit extended over shorter timeframes, so some digestion at these levels wouldn't be surprising. The move here is to be patient and buy strength above 34.
Zooming out, this is hallmark trend reversal behavior. When we looked into the individual components, we found this leader, which is breaking out as we speak.
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