Following a precipitous decline that saw the fund plunge 22% from late May to early July, entering a bear market in the process, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) attempted a modest rally that failed in August.

The ensuing rally looked far stronger as EWZ appeared to have found firm support in the $41-$42 area. By October, EWZ, the largest Brazil ETF by assets, was trading over $50 and some investors were thinking that perhaps the darkest clouds for Brazil and EWZ had passed. [Brazil ETFs Bounce as Central Bank Fights Inflation]

Dark clouds, perhaps too many to foster confidence among investors remain, and that explains EWZ’s recent tumble. Accounting for the Tuesday loss of 1.3% the ETF is sitting on at this writing, EWZ is lower by almost 7% in the past month. Laboring just pennies above $46, EWZ risks its first close below that level since early September. [Bad Signs for Emerging Markets ETFs]

Brazil, Latin America’s largest economy, has been stung on multiple fronts this year. Slack global commodities demand has sent shares of Vale (NYSE: VALE), the world’s largest iron ore producer and one of EWZ’s top holdings, down almost 29%. Petrobras (NYSE: PBR), Brazil’s state-run oil company, is once again one of the world’s worst-performing major oil stocks. Two Petrobras securities combine for over 12% of EWZ’s weight.

Inflation of 5.84% persists despite rampant increases to the benchmark Selic rate and economic growth is expected to be just 2.5% this year, a third of what Brazil posted in 2010. GDP growth of 2.5% is not much better than what the U.S. offers and the ETF trade-off is poor. Not only has EWZ significantly lagged the S&P 500, but the former has a three-year standard deviation of 26.6%, according to iShares data.

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