Trying for Some of That Western Magic

In the face of consistently weak performance for months on end, on top of a China Flash PMI miss last night, the emerging markets are now in the green and trying to stage an upside reversal. On the weekly chart, below, of the emerging markets ETF, consider the key $45 breakout level above, dating back several years. To pull back from it before a breakout is not all that unexpected, as the developed economies’ ETF, EFA, did just that last fall.

Now comes the real test, with the Jim Chanos and his ilk calling for a major slowdown in China. This ETF printed a hammer candlestick last week, and with today’s action that is still in play. Emerging markets become a logical rotation beneficiary if the bull has legs, with industrial giant CAT trying to find support right on the cusp of a major breakdown.

Let’s see if emerging markets can find some of that magic the U.S. markets have been enjoying.

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