I have always maintained that country ETFs are a leveraged play on the United States. In other worlds, when the big dog goes down, so will most of the rest of the world.
One reader had this to say:
Would like to have your thoughts on ILF. Though your trend tracker indicates being out of the market for international ETFs, can investors still invest in ETFs which are trading above their 200 day MA? For example, ILF trades just above its 200 day MA. Is it prudent to invest in such ETFs or not?
Let’s look at a chart of ILF first:
The price has clearly broken its long-term trend line to the downside by -2.14%. The high for the year occurred on 5/19/08 and since then, ILF has dropped some 16.65%.
Unless you are an aggressive bottom picker, which I don’t recommend, this fund has entered bear market territory, following the U. S. market with some delay. Personally, I would not buy ILF until it crosses its long-term trend line to the upside, which should be accompanied by our domestic Trend Tracking Index (TTI) turning bullish again.
Remember what happened with the China Fund (FXI), where many investors got their head handed to them on a silver platter as they tried to engage in bottom fishing.