Mexico Giving Ground After 42% Move From The Lows In June 2012

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Includes: EWW
by: Emerging Money

By Tim Seymour

Mexico (NYSEARCA:EWW) is weak. Why? Mexico has been in a deep swoon and has now broken the 200-day moving average support for the first time in over a year. The last time we saw Mexico break this technical level was in May/June of last year, and before that it happened in August 2011. The two reference points were dark and scary periods for emerging markets investing, so the question to ask regarding Mexico is: Are we in another one of those times for investing in this resilient country south of the border?

Mexican weakness (-12% off the recent top in five weeks) can be traced to macro weakness. March IP and GDP numbers were very soft. Mexico was a crowded and expensive market five weeks ago. It may still be crowded and mildly expensive. I don't expect this pullback to end quickly. Seasonal factors and politics tell me this move lower has some legs before stabilizing.