China and the emerging markets as a whole are notably weak today. We know they were incredibly resilient during the broad market correction in the U.S. last autumn. So, perhaps this weakness is a sign they are bound to see a rotation away from them for a bit. Bears will argue the weakness here is presaging a global risk pullback.
As you can see on the China ETF daily chart below, price fell out of a consolidation and is threatening a deeper pullback. It could be a nasty drop down to the 50-day moving average below and still be deemed within the context of an overall uptrend. Of course, this could also be yet another bear trap which stops on a dime and sprints to new rally highs. In order to determine which side has the edge, I am keying off of China/Google-wannabe Baidu’s chart. I pointed out an inverse head and shoulders setup a while back. The stock is currently consolidating after an initial thrust, and if it pushes on higher I am inclined to call this China/emerging markets sell-off pretty much done.
For at least this morning and midday, though, the latecomer longs in China and emerging markets are being placed in the dreaded “friend zone” of trading, where not much fun is being had by one and all.
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