This chart shows the dfferential between the iShares MSCI Japan Index (EWJ) and iShares MSCI Singapore Index (EWS) -- Japan minus Singapore. From May into February, the Singapore market rocketed (EWS) in relation to the Japanese market (EWJ), which reduced the premium of the EWJ to roughly $2/share from $6. During the past couple of weeks, however, the EWJ has performed better than the EWS, which has lifted the EWJ premium to $3.22 from $2.06. My technical work argues that the EWJ will continue to outperform the EWS (in either direction), and will expand the premium to $4.25-$4.50 in the upcoming days on the way to $6.00 thereafter. It is with this in mind, that I enter an equal dollar spread position, long the EWJ vs. short the EWS.



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.