New  Country Rotation System

Several years back Merrill Lynch Asia circulated a newsletter which discussed a country rotation system which generates buy and sell signals in different countries.

The idea is that if the system generates a buy signal in India, you move your money into India. When it generates a sell in India, and a buy signal in Japan, you move your money out of India and into Japan.

StocksAbroad.com has been experimenting with such a system, and we find that it has been very profitable over the last two years.

This system works well when a country is in a trend, but not well when the stock markets of the country are range bound. Currently, world markets are in a trend, and the Country Rotation System has a buy signal on five of the six countries followed by StocksAbroad.com. Current results are shown in the table below.

The value data is from the country ADR index of the Bank of New York. To get detailed information, news, and charts for the index click on the symbol:

Investors around the world are concerned about high oil prices, expected rising interest rates and inflation. These forces are likely to cause growth of the world economy to slow. Nevertheless, stock markets in many of these countries are currently trending up.

The Country Rotation System should perform well while this trending takes place.

We will not hesitate to overrule the system when real world knowledge about the country suggests that the risk is too high. For example, we have a buy signal on Argentina. However, Argentina waits for solution of its enormous international debt problem. The uncertainty here is much too high for StocksAbroad.com to recommend moving money into that country.