Daily and Weekly View of EEM Emerging Markets

Nov 30, 2009: 3:15 PM CST

In the aftermath of last week’s Dubai World market decline, let’s take a look at the EEM – the Emerging Markets ETF to see the recovery and current important level to watch going forward.

Weekly Chart:  EEM

After falling from its 2007 peak of $53 per share to $17.50 a year later, the most popular, highest volume Emerging Market ETF has recovered around 65% of its decline and is up 65% for the year of 2009 so far, after doubling from $20 to $40 from its March 2009 lows.

Structurally, price is above the 61.8% Fibonacci retracement near $40 per share, and the $40 level remains a critical price zone to watch for clues of expectation of highs yet to come, or an expected retracement ahead.

The $40 level also reflects the “Price Polarity” principle of support and resistance (see early 2008).

Should price break under $40, there would be the potential for confluence support at the $36 to $37 level from the 50% retracement and convergence of weekly moving averages.

The fly in the ointment – as is the case with many major market indexes currently – is the persistent negative momentum divergence that has formed through the latter half of 2009.  It’s a non-confirmation of price, but it is not reason alone to run for the hills and short-sell here, especially as long as price remains above the $40 level.

Let’s drop down to see the daily frame.

Daily:  EEM

Again, we see the $40 level as being important, as it is the zone between the 20 and 50 day exponential moving average, and price is – currently – supporting at that level.

Unlike other major market ETFs like the SPY or DIA, we are not necessarily seeing distinct negative volume divergences in EEM.  Volume has remained steady around the 75 million daily range – with the exception of major outflows in November.

So the Dubai World scare could not bring the EEM meaningfully under the $40 level – that alone is bullish.

The daily chart does show us the lengthy negative momentum divergence which is showing up on other US Market ETFs since the May period going forward – it’s something to watch, but in powerful uptrends, we rely more on moving averages than insights from momentum.

Keep watching the EEM for a benchmark of broad emerging markets and chart developments that may arise.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

13 Comments

13 Responses to “Daily and Weekly View of EEM Emerging Markets”

  1. Polorise Says:

    nice info … reaffirms my thinking that we will see a continued upward trend.

    Do you see this translating into regional / cuntry ETFs within Emerging Markets too ?

  2. Corey Rosenbloom, CMT Says:

    So far so good – the fact that price is above the $40 level and the 61.8% Fibonacci Resistance speaks volumes to the strength of emerging markets.

    Individual countries have performed better, and some will outperform indeed. EEM holds overseas/foreign stocks, and so if you want to specialize in a particular country, take a look at their country ETF for possible opportunities.

  3. pipercolt Says:

    So it looks like this could be a giant wave 5 up here to take us to somewhere in the neighbourhood of 45-55. This was not a double dip recession but indeed a V bottom. As one of the bears out there, I'll pay for that mistake.

  4. graspthemarket Says:

    I think the Russell is just as important as the EMM. Both are higher beta, and one might give a clue to how the other could “act.” The Russell 2000 appears to be tracing out 5 waves DOWN from the top on October 19. This chart shows the bottom of wave (1) that began on October 19, and top of wave (2) (the high on November 23). The rally that began on November 2 was a complex countertrend pattern. The first part of the countertrend was an ABC zigzag followed by a three wave move to the X low on November 13. The second part of the countertrend move traced out a triangle marked by ABCDE. You can see the labeled chart along with some other markets here: http://www.graspthemarket.com/elliottwave/20091

  5. Dan de Man Says:

    Also looks like we may see some popping stops days soon in the very near future. It was quite a bullish ending today on most of the indices.

  6. Corey Rosenbloom, CMT Says:

    Hey Piper,

    Well, you're certainly not alone. So many people have been baffled by this rally and the many failed sell signals (valid) that were generated.

    It's been interesting, for sure.

  7. Corey Rosenbloom, CMT Says:

    Hey Dan,

    Very possible – that's been a good deal of the upward march at least on the traders' end – popped stops at expected resistance levels.

    It's almost relentless, and if it keeps happening, then yes, new highs yet to come.

  8. Corey Rosenbloom, CMT Says:

    It certainly is a complex pattern, whatever it is! I try to stick to the “ABCs” of retracements and note the easier patterns (ie – not the corrections) using Elliott in my analysis.

    Thank you for sharing.

  9. graspthemarket Says:

    Corry,

    Thanks for taking time out of your busy day to help me and my count. I have another question, then. In this case, then…do you mean looking more at the bigger picture such as where I have (1) labeled and (2) labeled, and not the to “worry” as much about the labeling in between? When I was studying the Elliott Wave book, I came across the double and triple threes, and this seemed like a reasonable way to interpret the current chart. Thanks for any additional feedback if you have more time to offer.

  10. Corey Rosenbloom, CMT Says:

    By the bigger picture, I mean other forms of analysis including Fibonacci resistance, negative breadth divergences, negative volume divergences, the intermarket picture, etc. I treat each component as only one input and if I'm getting confusing signals from one source, I tend to focus on the others. I haven't even bothered counting the little fractal waves but that doesn't mean others won't have success counting them – it's just not something that I feel comfortable with (deep level counts).

    One other point is that triangles – ABCDE – often occur as the terminal moves before the final wave of a move – as in form in “B” before C completes or form in “4” before 5 completes.

    It's rare to find a triangle in a 2, but from your count, it looks like you've combined wave 2 and the ABCDE triangle (unless you're trying to show an alternate count).

    Perhaps the bigger picture in regards to small-cap and XLF is that it is breaking down from a standard “Edwards and Magee” style symmetrical triangle.

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