A Crack in Emerging Markets

• Posted by Greg Harmon
• on April 11th, 2017

Emerging Markets started higher in December and confirmed a double bottom break out in early January. They continued higher through the end of February before a 3 week pullback to the 50 day SMA. With a Hammer reversal in early March they started higher again, to a plateau where they have been since the Ides of March. Spinning sideways in a a tight 1 point range.

Monday they dropped below support for the first time. It was really just a crack in the foundation maybe, like a little unevenness in the floor of an old home. But in a market where one day run ups and then reversals of the Indexes are the only sign of a heartbeat, it qualifies for news. Will it erupt into an explosion to the downside? The chart below shows the offense.

It may turn out to be nothing at all. But there is gathering evidence to at least keep an eye here and see what happens. The Bollinger Bands® are squeezing. This often happens just prior to a move. The RSI is bullish, but pulling back to the mid line. This could just be a reset before another leg higher as consolidation dries up momentum. Or it could continue lower into the bearish zone.

The MACD has also crossed down and is falling. It remains in positive territory for now. A move back to the 50 day SMA again would only just breech the lower Bollinger Band. And that would complete a retest of the highs from August and September. I do not know where this is going in the short run. But it is showing signs that it wants you to pay attention now.

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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.

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