The Dance of the SPY and Emerging Markets

The S&P 500 SPDR, $SPY, has been getting comfortable with its relationship to the Emerging Markets over the last two and a half months. Since we discussed the imminent move in Macro Flows Set from Emerging Markets into US Markets on April 25th, there has been a pop higher in the ratio of $SPY to iShares MSCI Emerging Markets ETF, $EEM, and then this settling out. As seen in the ratio chart below there is a solid floor at a ratio of 3.45. Each time it has touched it or gone below it has printed a Hollow Red Candle. These candles show intraday bullish action. In trader terms, buying the dip. But it has also shown a reluctance to continue the move higher with each touch or breach of 3.62 being met with the opposite Solid Black Candle. Selling the rips. It is

comfortable in its channel. There are no indications that it wants to move out. The Relative Strength Index (RSI) has been running near the mid line, and the Moving Average Convergence Divergence indicator (MACD) is muddling along. The rising green trend line suggests that this could go on until the end of August. So what do you do? Wait. You could play the moves within the channel but that is a losing proposition as they moves are never from one end to the other. This is why traders look for a trend. From a macro perspective what does this mean for the $SPY, $EEM and the broader picture? Continued muddling along, with a bias towards owning US Equities. The world is on hold.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog