One of the most popular ETFs tracking Brazilian stocks, the iShares MSCI Brazil Capped ETF (EWZ), is up 26.5 percent in the last three months. That trounced the U.S. benchmark S&P 500 index, which was up just 5 percent during the period.
Compared to the U.S., that should make Brazil's stocks as exciting as the Netherland's 5-1 victory over Spain, right? Maybe not, according to some.
David Seaburg, head of sales trading at Cowen and Company, says what's driving the Brazilian market are the country's October presidential elections.
"The incumbent right now is not really business-friendly," said Seaburg of Brazilian President Dilma Rousseff. "Any time the opposition gets any sort of move up in the polls, you see their market rally."
Recent polls have Rousseff still ahead of her two main opponents, Aecio Neves and Eduardo Campos.
"We'll see what happens," said Seaburg. "But I think there could be a very quick near-term pullback in this particular index."
Richard Ross, global technical strategist at Auerbach Grayson, also thinks the EWZ has run as far as it can in the short term. He sees Brazil as a proxy for the general emerging market trade. But, he believes it has run its course.
"This rally is in stoppage time," said Ross, a "Talking Numbers" contributor. But, that stoppage is "the old kind of stoppage time where they don't tell you how much time is left but you know the whistle is near."
A year-to-date chart shows the EWZ falling 15 percent from the start of January to Feb. 3. "But then, Brazil finds its footing," Ross said. "You get a nice little base breakout. You reclaim the 200-day moving average."
Ross' charts show the EWZ trading in a range of $45 to $50 starting in April. It is now near the upper end of that range. He believes the EWZ will fail its test of that resistance and go lower. "I see in the short term a pullback to that key support at a minimum," he said.
But the news gets worse for the Brazil ETF, according to Ross. His longer-term chart shows the EWZ trading in a downward-sloping trading range starting in 2011.
"This market has been a very well-defined downward-sloping trend channel since 2011," said Ross. That "compares and contrasts to the developed world, which has done nothing but go higher in the U.S., Europe, and Japan."
What's more, the EWZ's 100-week moving average has served as resistance for much of the past three years. The moving average is near the $50 level as well.
"If we did get a decisive break above that trend channel, above that long-term moving average, I would become more constructive, I would be more bullish," Ross added. "But, otherwise, this just looks like a very strong rally within the context of an otherwise very pervasive and overtly bearish downtrend which you must avoid."
To see the full discussion on the EWZ, with Seaburg on the fundamentals and Ross on the technicals, watch the above video.