Time to Stomp the Little Guy, What We do Best, Go America!

Emerging Markets have been on fire while the US markets have been pulling back. But there are signs that trend may be reversing. Ready for a quick trade to take advantage of it? Below is the ratio chart for the S&P 500 ETF,$SPY, vs the Emerging Markets ETF,$EEM. This pair has been in a downward channel since the end of February. Recently it has bounced off of the channel bottom and back over the 200 day Simple Moving Average (SMA). It tested that level again Monday and held. Additionally the Relative Strength Index (RSI) has based and is now moving higher and the Moving Average Convergence Divergence (MACD) indicator peaked negative and is now improving. As long as this continues a reversal may be happening.

Using the 200 day SMA as a stop, this can be played by buying 100 shares of SPY for every 268 shares sold short of EEM (a shape). Look for a move to a ratio of 2.74 which would mean a profit of $295 – $302 for each shape traded. This will bring it to the top of the channel. If it can get through that then the next target would be the 50 day SMA at 2.81 for a profit of $618-$648 per shape. Trade’m well.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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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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