Sunday, August 31, 2014

EEM Emerging Markets Weekly Chart Sideways Channel Overbot Rising Wedge Negative Divergence

EEM is another favorite flavor of long traders nowadays as everyone is flush with central banker cash looking for another suitcase to stuff. Emerging market were in a multi-year sideways funk through the 35-43 channel until 3 and 4 months ago when price broke up and out of the 43-44 area. As a result, many are waving banners with EEM letters saying the breakout will lead to wildly higher prices ahead. The chart disagrees.

The breakout is important since a multi-year ceiling gave way, however, an important top is at 45-ish from 2011 so in essence price continues through a larger sideways 5-year 34-45 channel. The red lines show universal negative divergence across all indicators both in the couple-year time frame and the shorter-term few week time frame. The current action shows price climbing up into a rising wedge and stochastics are overbot coming off higher levels both favoring the bears. Watch for the MACD line cross and that will tell you that EEM is cooked, or not.

Projection is for EEM to top out at 45-48 over the coming days or week or three and then roll over down to a back kiss of the 43-44 area and likely move down into the long-term sideways channel through 35-43. The EEM bears need the negative MACD line cross. If the MACD lines remain positive price will coninue drifting higher. The volume of the selling weeks are far larger than the buying weeks. Perhaps the smart money is pumping and dumping. Pundits are cheer leading the emerging market stocks daily and may be sneaking out the back door as Ma and Pa takes their entire life savings and buys EEM always showing up late to the party. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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