EEM Emerging Market Weekly Chart; Downward-Sloping Channel; Positive Divergence

If you attend any swanky dinner party in Manhattan these days, someone will surely pull you aside at the buffet table and whisper two words in your ear, "Emerging Markets." Traders and investors are anxious to buy emerging markets after its one-year bludgeoning.

EEM, the emerging markets ETF, is popping up and out of that downward-sloping channel (black). Emerging market bulls are emboldened by the move and as they buy, the weak shorts are running for the exits fueling the upside with short-covering. The positive divergence (green lines) provides upside fuel and helps the bulls defend that 200-week MA support level at 38; a line in the sand. The 50-month MA is also 38. If the 38 level fails, its lights out for emerging markets.

The indicators are long and strong so more higher highs are expected in this weekly time frame after any pullbacks. Price just poked above the 20-week MA at 40.14 a big feather in the bull's cap. Watch to see if that, and the channel break-out, hold, or not. If price moves higher as the indicators suggest, the upper band is at 42.65 which serves as a target and the 50-week MA is at 43.26 and dropping.

The EEM monthly chart is not as joyous. The MACD line and money flow are weak and bleak on the monthly so price likely wants to retreat again and come down to test the critical 38 a couple months out. That will be for all the marbles.

Note the volume candlesticks on the weekly chart above. The buying volume is only one-half of the selling volume occurring in December. That hints that when price comes back up, sellers are likely to enter and slam it hard.

EEM is at 41 and likely has 42 on tap over the next week or two, perhaps 43 and 44. It will depend on when the weekly chart sets up with negative divergence. It is not attractive to buy at 41 to play for a 42.65 outcome. This will likely occur but there are other trades that Keystone will spend his time on. There is not a lot of meat on the EM bone.

After the few-week rally for EEM, say late January into early February, EEM will likely roll over from that 42-44 zone and come down to tap on the 38 level where emerging markets will make a critical decision to either bounce, or die. 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.