Bearish Reversal Could Be Taking Shape For Emerging Markets (EEM)

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September 27, 2017 10:39am NYSE:EEM


From Chris Kimble: Emerging markets were much weaker than the S&P 500 from 2011 to 2016, underperforming the S&P by more than 60%.

Over the past 10-months, however, Emerging markets (EEM) have been much stronger than the S&P 500. Below highlights the strength of EEM over SPY the past year.

The ratio has created a uniform rising channel, that hit dual resistance at (1) around 6-weeks ago. Since hitting dual resistance, EEM has underperformed the S&P for the past 6-weeks, as it is now testing rising support at (2). This is a big test of support at (2), due to the 10-year trend of lower highs remains in play.

Below looks at EEM on a monthly basis over the past 13-years-

As the month is nearing a close, EEM could be forming a bearish reversal pattern (bearish wick) at dual resistance at (1), while momentum is the highest since the peak in 2007. If weakness would happen to start taking place at (1), would send caution message to EEM bulls. Emerging markets bulls want to see a breakout at (1), not weakness taking place!

EEM peaked in 2012, 2013 and 2014 just below the $45 zone. Bulls would get an encouraging price message if resistance is taken out. We humbly feel what takes place at this key price point at (1), is one of the most important tests in years for EEM! Might be worth keeping a very close eye on what happens here.

The iShares MSCI Emerging Markets Index ETF (EEM) was trading at $44.31 per share on Wednesday morning, down $0.18 (-0.40%). Year-to-date, EEM has gained 27.15%, versus a 12.69% rise in the benchmark S&P 500 index during the same period.

EEM currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 80 ETFs in the Emerging Markets Equities ETFs category.

This article is brought to you courtesy of Kimble Charting Solutions.

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