EEM Breakdown

EEM Breakdown

Following the breakdown in trade talks between the US and China over the weekend, a significant breakdown of another kind is taking shape in one of the charts I follow. EEM is the Blackrock iShares Emerging Markets ETF that provides investors with exposure to the stock markets of Asia. China has a 33% allocation in the fund. The heavy selling that occurred yesterday has done significant damage to the chart. In 2018, EEM broke out above decade-long resistance in what was quite a bullish development for the region. However, the breakout was short-lived and EEM spent the rest of 2018 falling sharply.

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Resistance Ahead

Resistance Ahead

Following a-20% peak-to-trough correction in stock markets in December, we are now witnessing a powerful oversold rally. How far will it run? Is it a counter-trend rally in a new bear market or the beginning of a new leg higher in a still-ageing bull market? We are about to find out. Stock indices are approaching strong resistance overhead. The long-term 50-week moving average has started to coil downwards for all the major indices for the first time since 2016. This should cap the recent rally in stock markets. If somehow equities can power through the strong resistance overhead and turn the moving-averages back up, turning resistance into support, it will be some performance by the bulls. In that event, the Active Asset Allocator will return to a fully invested position. Until then, defense remains the priority.

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Trouble Brewing!

Trouble Brewing!

Trouble is brewing across global equity markets, as I have been highlighting for months now. Dams are starting to break and risks are running high. European equities, measured by the STOXX Europe 600 Index, have been consolidating in a range for the past three years but look to be breaking lower now out of that range. There is a lot of room to fall.

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The Year of Divergence

The Year of Divergence

While the S&P has added +12% in local currency terms this year, the United States is the only major market in positive territory year-to-date. European stock markets are rolling over while many emerging markets appear to be grappling with developing crises. The technical indicators I follow are confirming the weakening trend across equity markets. Perhaps we are experiencing another correction before the bull market resumes…

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EEM in Euros - Ready, Set...

EEM in Euros - Ready, Set...

Yesterday, I posted the bullish chart of the iShares MSCI Emerging Markets ETF in US dollars breaking out to new all-time highs. When denominated in Euros, EEM has also been making a series of higher highs and higher lows over the last 10 years, but the breakout is less clear. There is an ascending triangle pattern forming but there is still resistance overhead. Interestingly, a similar pattern formed from the 2000 top to the 2007 top which broke violently lower during the 2008 financial crisis. It may turn out different this time, but price EEM in euros still has some work to do before getting the all-clear.

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Emerging Markets Breakout

Emerging Markets Breakout

I have been tracking the progress of European equities over the course of 2018, looking for a breakout to new all time highs to take a position in the Active Asset Allocator. So far, European equities have failed to punch through overhead resistance. The same cannot be said for Emerging markets, however. The iShares MSCI Emerging Markets ETF broke out to new all-time highs earlier this year, quite a bullish development. So far, this resistance zone has now become a key support level for the region. Emerging market equities tend to trade inversely to the US dollar, so the recent spike in USD has led to the short-term correction in USD.

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