Macro Flows Set from Emerging Markets into US Markets

Checking in on the Emerging Markets, via the iShares MSCI Emerging Markets ETF, $EEM, shows that it is at that critical juncture with the S & P 500 SPDR, $SPY again. The ratio chart below shows it right at resistance at 3.30. Notice that it has moved over that ratio 4 times and each time it printed a solid black candle, indicating very bearish intra-day activity. It sold off all day from an open near the high. So why should we look at it now? A couple of reasons. First, the Bollinger bands are getting very tight. This typically leads to a big move in one direction or the other. Second the Relative Strength Index (RSI) is holding in bullish territory and looking higher. But it has failed while the RSI has been bullish before. What makes it different this time is that the Moving Average

Convergence Divergence (MACD) indicator, in the lower panel of the chart, is trending up. Every previous time that the ratio has broken above the 3.30 resistance level the MACD indicator has been trending lower. This time is set up differently. If it can break over 3.30 this time, it is set up to move higher with a target of 3.50. The $EEM is already moving lower and it can get to the target solely through more downside there. But Considering the Hollow Red Hammers from Monday that were confirmed Tuesday (ex- the $QQQ), perhaps it is time to be long the broad market again.

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