Emerging markets and the US dollar are inversely correlated. The US dollar helps drive emerging market performance in part because commodities and commodities are major exports in the developing world. When the dollar strengthens, commodities become more expensive in dollar terms, thus less demand and when the dollar weakens, commodities become less expensive in dollar terms, thus more demand.
With US interest rates now on hold, logically the dollar should fall in price in 2019. And because China accounts for about a quarter of the ETF, EEM and trade deal between the US and China should only cause the EEM to rise.
Four months ago I wrote a post titled,
Stock Analysis Report 10-19-18 The Emerging Market ETF, EEM Is In A Bear Market – Part II
One set up to the downside was already missed when price pulled back to the daily supply zone at $40.81, so let see if price action gives those who want to get short another set up in the near future.
Any idea of getting short the EEM has to be aborted for the fundamental reasons I stated above. But from a technical standpoint the two reasons to abort any idea of getting short are the following:
1) Price broke the weekly downtrend line.
2) Probably more important price formed a “W” pattern which is a bullish reversal pattern.
The chart suggest to buy price on the pull back to the daily demand at $39.75.
Part of being a successful trader is keeping your ego in check and when you are wrong, you acknowledge right way and move on to the next opportunity. This is similar to saying you can’t be married to a trade or thesis, you only can date a trade or thesis.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.
Get involved!
Comments