Emerging Markets are about to submerge below a 6 year channel

• Posted by Greg Harmon
• on August 12th, 2015

The focus over the past day 24 hours has been China. As they tweeked their currency a ripple went through the global markets. Or maybe it was from something else. Before that we had the crisis in Greece that was threatening all of Europe. And ongoing through all that the debate in the US about when the Fed will raise interest rates.

What do all these things have in common? None of them have had any material impact on the world equity markets. European markets are sitting at all time highs as are those in the US. The Japanese Nikkei is approaching 15 year highs. You can argue with me about China with the Shanghai Composite 20% off its high, but that is still almost 100% above where it was this time last year! Every market is doing great. Well there is one that is not, Emerging Markets. Emerging markets are sinking like they are correlated to climate change.

The chart above shows the Emerging Market ETF on a weekly basis since mid 2009. Look at the last 4 years. Nothing, absolutely nothing has happened. in fact, after a monster fall like all equity markets into the 2009 low, it overshot the range to the upside and then briefly to the downside before settling in. This is really a 6 year range!

So Emerging Markets have done nothing while world markets are blasting higher. Some will tell you that this is expected. With strength in developed economies it is time to invest there. The Emerging Markets will lag and join after the Developed markets have reached strong valuations. Ok maybe. But they are not just lagging right now. They are on the verge of a break down.

The ETF has been at the bottom of this range before so maybe it will bounce again. The important price levels to watch are 36 and then 34. It has stopped every time at 36 except once since 2010, and it is there right now. The one time it didn’t, on that initial undershoot, 34 was important. If the price gets under 34 you can see from the horizontal read volume by price bars on the left side, that there is a vacuum of price history underneath. This means it could fall far and fast.

Get my ebook, Markets for 2015 and Beyond, a long term forecast with all proceeds going to charity.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through July 2015 Expiry and sign up here

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