By Andrew Nyquist
After Wednesday’s gap higher, the Emerging Markets (EEM) went into consolidation mode, tracking with the major indices for most of Wednesday and Thursday. But Friday got off to a slow start. Although the index came back nicely, it failed to make a new high for the week. It also underperformed the major indices, along with fellow high beta brother, the Small Caps Index (IWM).
Don’t get me wrong, I still like the Emerging Markets, but this could be a sign that more backing and filling is necessary, or that EEM may start to lag other areas of the global marketplace (on a short term basis). One day does not a trend make, but considering that the Emerging Markets registered a daily RSI of 80 on Wednesday, the index is probably a bit overheated and in need of a cool down.
Technically speaking, the Emerging Markets index fund is about 3 percent above it’s very near-term uptrend line ($43.70 and rising), 7 percent above its 50 day moving average (and 50 fib), and almost 10 percent above its intermediate term uptrend line. Now this doesn’t mean that it needs to pull back to any one of these technical support levels, just that it has room to pull back and keep the longer term trend healthy. For now, I’d watch the near-term uptrend line for clues. As long as that is in tact, the” fun and run higher” move is still on. See Emerging Markets (EEM) chart below.
Trade safe, trade disciplined.
Emerging Markets (EEM) stock chart with technical support levels and technical analysis.
No position in any of the securities mentioned at the time of publication.