“Not only do I think you should stay away from Mexico, I find little reason not to be short Mexico outright,” notes J.C. Parets of Eagle Bay Capital. “Right now, based on everything I see out there, the only positives that I see here are a potential short-term oversold bounce that I would sell aggressively right into.”
Problematic for EWW’s near-term outlook is the fact that investors seem to be glossing over political and energy sector reforms initiated in Mexico last year and the prospect of slightly faster GDP growth in the U.S. this year. Put simply, EWW has not responded to those headlines and the ETF has been a mess compared to U.S. stocks, which Parets points out.
“When we’re looking to allocate assets into a particular country’s stock market, we want to see strength in that market, or at the very least a sign that strength might be shifting into that market. In this chart below, you can see the exact opposite – Mexico literally crashing relative to US Stocks. This is a chart of $EWW vs $SPY down 30% since the beginning of last year,” said Parets.
Chart Courtesy: J.C. Parets Eagle Bay Capital, LLC