As I wrote in my previous post, I was expecting a lot of volatility, but this was more than what I was thinking! IBOV went down on monday just 1 week before the 1st round of the elections, but recovered a little bit on Thursday and Friday as you can see on the first chart.
Where is IBOV going? Honestly, anything can happen during the next month, until the 2nd round. One thing that is clear for investors (and I mean American investors because they represent more than 50% of volume negotiated in Ibovespa) is that they prefer Aecio Neves than Dilma Roussef. This is based on the correlation that every time that Brazil showed a pool saying that Roussef would be re-elected, IBOV went down and every time it showed she could lose, IBOV went up.
Just to complement my ideas, here is a phrase from Bloomberg to support my position and the entire article: For much of the year stocks rallied on falling support for Rousseff in opinion surveys as investors bet an opposition candidate would do more to improve Brazil’s business environment, slash above-target inflation, and reduce deficit spending. Since Sept. 2, when the president started rebounding in the polls, the Ibovespa index has lost 11.9 percent and the real dropped 8.7 percent against the dollar.
http://www.bloomberg.com/news/2014-10-05/neves-to-face-rousseff-in-brazil-in-surprise-comeback.html
Therefore, I believe we will have a month of volatility and I believe IBOV may go up next week, because Neves reduced the distance to Roussef at the end of last week and this was confirmed today after the elections.
This week I will continue being conservative and I will only invest in KROT3 (if the trade starts)
Start Gain (buy ONLY IF achieves) 15.42 ; Stop Gain (sell 70% of what you buy) +3% ; Stop Loss 14.19
Have a great week and please, share this post with your friends that like to invest in stocks.
Leo.
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