What Will It Take To Get Emerging Markets ETF Back On Its Feet? (EEM, VWO, FXE, FXA, CYB)

Tim Seymour: If Santa is coming for the emerging markets, he had better load up on bullish sentiment, because the trend is starting to look like it did over the summer — and August was anything but a “Santa rally.”

Take a fund like the iShares MSCI Emerging Markets Index ETF (NYSEARCA:EEM), which is now up only seven days over the last month and has lost an aggregate 8% over that time frame.

What is frustrating about this particular swing is that we were lurching below the 50-day trend line a month ago as EEM headed to a recent low around $36, so the subsequent pop above the line was short-lived.

By comparison, the October rally held the 50-day line for over a month before flipping that near-term support back into resistance.

At this point, the 200-day line is still in range of a full-force Santa rally, up only 16% at $43.56.

But to hit that line — much less reconquer the 50-day trend at $39.19 — we are going to need a real recovery in emerging currencies.

That means a reversal of the recent “risk off” frenzy in which the euro and everything behind it on the conventional risk scale get sold off, forcing many traders to liquidate emerging stocks to raise cash.

The yuan (NYSEARCA:CYB) is not the euro. The Australian dollar (NYSEARCA:FXA) is not the euro (NYSEARCA:FXE). And the global economy does not look as bad as the chart may imply.

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money.   He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class.  With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of  tomorrow, today. Seymour’s career has included  significant experience in both alternative asset management (hedge  funds) and capital markets, having launched two hedge funds, and built the largest Russian broker  dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a  specialized hedge fund  group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at  Georgetown University.

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