Brazil's Ibovespa finally sees significant participation

Key points

• Brazilian equities have staged a massive breadth thrust, snapping a 52-day streak of poor participation and sending the Ibovespa McClellan Oscillator surging above +100.
• Historically, for local investors tracking the Ibovespa index, this specific momentum trigger boasts a perfect 100% win rate and zero drawdowns exceeding 5% over the subsequent 1-to-5-month window.
• Similar surges tended to precede further gains, but non-local investors must consider currency risk

Brazilian stocks are enjoying another resurgence

The Brazilian market is experiencing a broad-based rebound that has materialized over recent weeks. Several of the key internal metrics we monitor have violently reversed from deeply depressed levels. We observed a similar structural recovery last August; it suggested a multi-month continuation, which did occur before giving back some of those gains and triggering another round of extremes.

The jump in stocks in the Ibovespa index triggered a surge in the McClellan Oscillator, which surged above +100. Investors must be willing to buy broadly, persistently, and aggressively for the McOsc to move above that threshold. When triggered for this index, it signaled that investors were willing to stick around for the medium term.