"I would ask you the following question below, maybe interesting for other people too. And we also can discuss in Singapore later this month. So the Lyxor funds can wait.

"When I want to analyze the chart characteristics of a stock market, especially regarding its mean reversion towards the MA200 (but also in term of lower/ higher lows/ highs, etc.), is it relevant to look at a tracker or fund in my own currency (e.g. euro), or should I look at the market in its local currency, or both?

For example, I got trapped with Turkey:

In local currency, the MA was penetrated on Feb 24, there was a bounce up on Mar 2, and the MA was overtaken on Mar 10, so the market barely had 10 days under the MA; there seems to be now at least a consolidation between 60 or 63,000 and 70,000

In Euro, the tracker TUR from Lyxor (FR0010326256) obviously include the impact of the exchange rate (Turkish Lira/ Euro); it bounced on the MA on Dec 20, but 10 days later went down through the MA on Jan 18, bottomed also on Mar 2 and this tracker is now testing the MA in order to penetrate it upwards; TUR charts does not look as healthy as the one in local currency.

Because I don't use market futures, I bought the tracker TUR a bit before Dec 20 (thinking the ongoing bull markets will ensure a bounce; my mistake! too early purchase, the fund went down 15% afterwards, although a lot has now been recovered).
Your comments will be therefore very useful! Thanks as always for your very good service!"

"I put below the charts mentioned. Thanks for your help and kind regards,"

Eoin Treacy's view Thank you for this question which I'm sure will be of interest to other subscribers. I'm looking forward to meeting you and other subscribers at the upcoming Chart Seminars in Singapore and Sydney in less than three weeks.

I believe the most important issue which needs to be emphasised is that an ETF is a derivative instrument by definition. It attempts to track another instrument. When that instrument is in a different currency from the fund's, the degree of complication is multiplied. Therefore, it is vital to understand what the fund is trying to track and how well it does the job.

The Euro denominated Lyxor ETF Turkey tracks the US Dollar denominated Dow Jones Turkey Titans 20 Index. Here is a portion from the description on Bloomberg:

The Dow Jones Turkey Titans 20 Index is constructed by selecting companies from Turkey within the broad based Dow Jones Global Indexes family with the objective of optimizing the factors of greatest importance in an investable index. The index is quoted in USD.

This suggests that the Index is highly concentrated in large cap shares. The National 100 Index, as you mention in your email, had a shallower reaction but the ETF does not track that index.

I fully accept that currency differentials offer an added degree of complication for those seeking to invest globally. However, it is important to keep in mind why one is investing in another country relative one's own. Presumably it is because you believe that the medium to long-term prospects for outsized corporate profits in the target country will compensate you for the effort put into your investment.

David coined the phrase "governance is everything" and it is no less important today. The Venezuelan stock market is currently soaring in the local currency. However, the Bolivar's devaluation has made the country unattractive for foreign investors.

Turkey is at the other end of the spectrum. Standards of fiscal, corporate and economic governance have been improving steadily for the last decade. Marketed as the gateway to the Middle East, Turkey was prone to a pullback following the civil unrest in Tunisia. (Also see Comment of the Day on January 28th). As you point out if found support in the region of 60,000 which also marked the 2008 peak and has rebounded impressively. .


The Euro has been ranging with an upward bias against the Turkish Lira for much of the last decade; moving from TRY1.5 in 2002 to TRY2.25 last month (50%). Over the same timeframe the National 100 has risen from 10,000 to 70,000 (600%).

The Euro lost upward momentum from 2009 but the ensuing congestion area is quite wide. The rate retested the upper side of this range in March and a clear upward dynamic would be required to check potential for some additional downside for the Euro.

It is impossible to know how much higher the Turkish market is likely to advance but the medium-term uptrend remains relatively consistent. The benefit of the doubt can be given to the upside provided the low near 60,000 holds. I believe the odds are better than even that the Lira will be more of tailwind than headwind for Euro investors over the next decade.

In general terms, I prefer to look at local currency data because that is what has the most influence on domestic investors. Foreign currency investors would also be well served by keeping a close eye on the relevant cross rate for signs of major topping or bottoming activity. Finally, since one might be invested via an ETF or fund, it is important to also monitor those instruments, particularly to gauge how well they are performing their prescribed functions.