EEM Emerging Markets ETF Daily Chart; Golden Cross; Potential M Top

The arm-chair technicians are coming out of the woodwork to proclaim the golden cross in EEM, the emerging markets ETF. Investors are tripping over each other to buy the riskier emerging markets looking for big returns. Their greedy eyes are as large as saucers.

The golden cross is the 50-day MA moving above the 200-day MA which signals higher prices ahead. As you followers of Keystone know, in the near-term, the golden cross typically means it is sell time. Price bottomed at Halloween last Fall and it took these many months to finally create the golden cross. After such a long road, price typically wants to take a rest. You would to if you climbed a mountain and arrived at the top where the golden cross was at. So the expectation would be for a drop in EEM for a few days or week or two.

This price action then causes the arm-chair technicians to proclaim that golden crosses are folly since the stock, or index, in this case EEM, potentially drops after the cross forms. But, this would be expected. After price pulls back, that is when you keep watching the golden cross and as long as it remains in play, the stock price will move sideways to sideways higher.

The neggie d (red lines) spanked price lower at the end of February. Price is now staggering sideways. It violated the lower standard deviation band so it came up to touch the middle band at 42.57. EEM may want to drop to the 200-day MA at 41.64 for another test (look at how this has been holding) and if that fails, look out below. 

The chart displays a potential M Top, or double-top, formation in play and price has been moving through the sideways channel at 42.0-43.5. The M Top targets 40-ish on the downside if the 41.5-42.0 level fails. Keystone does not hold a position in EEM. Since a pullback typically occurs after a golden cross, if you have been wanting to buy emerging markets, wait for a week or two and buy the dip, however, there is likely a lot of sideways chop ahead. Price may stagger through 40-44 for the next year. If you are a risk-taker, consider a short play in the short term for the coming days. Keystone will likely not play EEM this year since there are more attractive playgrounds elsewhere. 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.