Turn Out The Lights, THD's Party Is Over

The ETF vicitms at the hands of Asia's inflation woes are starting to pile up quite rapidly in 2011. Last year's market leaders have turned south in a major way. Sure, some of it can be attributed to delayed profit-taking for tax reasons, but the real reason is inflation is a black cloud hanging over 2010 darlings such as Indonesia and Thailand. In the essence of full disclosure, the ETF Professor loved the iShares MSCI Thailand Investable Market Index

for much of 2010 and that was the right thing to do, but all good things must come to an end. We noticed the tide turning in THD in November 2010 and while the ETF put up a fight, sort of, it's fair to say its best days are behind it, at least for now. Thailand has tried raising interest rates to cool inflation, but that just feeds the rising baht, in turn hampering an export-driven economy. Now the specter of political tension is back with the Red Shirts protesting in Bangkok on Sunday and the Yellow Shirts due to take their turn on Tuesday. The last batch of political protests in Thailand in 2010 led to a nice buying opportunity in THD, but that was pre-inflation concerns and the ETF was at a far better buy point back then. Inflation and political risks give Thailand a frontier, not emerging markets feel and with THD hovering near $57 for the first time since October, the chart is broken and telling the bulls to stay away. For whatever reason, THD is not optionable, so the only way to profit from its decline is to short it directly, but if $55 doesn't hold as a support, THD is probably going to $49, if not lower.