Argentina and India outperform across emerging marketsAmong emerging markets, Argentina and India have been booming.
Whereas countries like South Africa and Brazil have been stagnating (as measured by global ETFs).
Em
Emerging markets (EEM) - Bear Flag targets $18Back in 2021, I posted about Emerging markets with a title "EEM. Emerging markets could drop within the last leg down"
The plan plays out well so far and I found another educational pattern for you on it today.
The Bear Flag appears in the chart as I spotted it on time. The price is still within the Flag
and breakdown below the downside of the pattern would trigger the continuation of the downtrend after this consolidation.
The target is located at the distance of the Pole subtracted from the downside of the Flag.
$18 is the bottom of the large range and the aim for the Bear Flag.
This is the beauty of the patterns as they match with other type of analysis.
Tech Booms Versus Emerging MarketsWhen capitalism nearly died in 2008, major stock market indices experienced >50% drawdowns from all-time highs. After unprecedented interventions by the Federal Reserve — and a historic surge in government debt to GDP — tech, growth, and the S&P 500 have seen stellar returns. (QQQ, VUG, & SPY respectively above).
On the other hand — small caps (VB), value (VTV), real estate (VNQ), developed markets (VEA), and emerging markets (IEMG) — have significantly underperformed. Tech companies have become more valuable than most countries’ GDP. Recently, the total market cap for top tech companies has surpassed $14T.
Will the tech boom continue upwards or is it time for small caps plus value to mean revert to a fair historical share of the total market? Tech also leads dominance for the U.S. versus other developed and emerging markets. More recently, the divergence is especially striking in percent returns and drawdown visualizations since 2020.
The next decade belongs to Latin AmericaFor the past decade, decision-makers in major banks and multinational companies have been focusing their attention on one of the hottest "growth frontiers": emerging markets.
During much of the 1980's the prospects in most emerging countries were quite bleak: the debt crisis, inflation and domestic political turbulence.
Then a number of "economic miracles" began to pop up, drawing attention to specifically Southeast Asia, the Indian subcontinent, Eastern Europe and toward the end of the 80's, Latin America.
Latin America struggled with the heavy burdens of the debt crisis, hyperinflation, recession and the transition from authoritarian to democratic governments. Most analysts call the 80's Latin America's "Lost Decade." Most governments in the area came to the realization that they were gradually becoming irrelevant to the investment decisions of major international players and that they would slowly but surely lose ground to Asia and Eastern Europe in the competition for capital and employment opportunities. The region's trade with the rest of the world increased but at a slower pace than in countries at similar stages of their development. Latin America largely remained an exporter of primary goods. In fact, beside the popping off of just particular industry sectors and multinational companies, Latin America never saw a bullrun as a continent.
After lagging behind big players like India and China during the Era of Markets (1989–2019), where there was a remarkable increase in global economic interconnectedness and rapid adoption of digital technologies, now it's time to shine for Latin America and to catch up to OECD economies.
The next decade is expected to be a transformative period for Latin America with many countries experiencing rapid growth and development.
Economic Growth : Latin America's economic growth is expected to continue, driven by a combination of factors such as increased trade, investment, and infrastructure development. The region's large and growing middle class is also driving consumer spending and demand for goods and services.
Regional Integration : Latin America is also expected to strengthen its regional integration, with initiatives such as the Pacific Alliance and the Mercosur bloc aiming to promote trade and cooperation among member states. This will help to increase economic competitiveness and attract foreign investment.
Demographic Dividend : Latin America is experiencing a demographic dividend, with a large and growing population of young people entering the workforce. This will provide a significant boost to economic growth and innovation, as well as help to address social and economic challenges.
Innovation and Technology : Latin America is also expected to become a hub for innovation and technology, with many countries investing in digital infrastructure and innovation hubs. This will help to drive economic growth and create new opportunities for entrepreneurship and job creation.
Emerging countries now represent the clear majority of the world's population. Their growth prospects range from 4 to 5% per year in Latin America, 6 to 7% in East Asia and up to 10% in China. These are typically two to three times the expected growth rates of developed countries.
In all of these countries, growth will invariably entail the expansion of new middle classes, with outsized needs for consumer durables, housing and mobility.
The MSCI Emerging Markets Latin America Index e.g. captures large and mid cap representation across 5 emerging markets countries in Latin America. This index is one of the most trusted measures of how these stock markets in the region are performing. However, all the constituent countries do not have a proportional representation in the index. The country weights in the MSCI Emerging Markets Latin America Index are mostly Brazil 46.6%, Mexico 36.51%, Chile 9.79%, Colombia 4.17% and Peru 2.93% with sectors like materials, energy, consumer staples, common services and financials.
Looking at the Index from a technical macro standpoint we can see clearly almost 20 years of an (Wyckoff) accumulation period (with the launch in 1990 probably even longer) and sideways movement resulting in a kind of created bull flag signaling a continuous coming-in of buyers and losing steam of sellers.
Furthermore the monthly RSI is printing higher lows and higher highs which is an indicator for a steady uptrend and positive momentum shift towards the upside.
No doubt, Latin America is gonna flourish the next decade(s) marking a significant transformation, with the region poised to emerge as a major player on the global stage.
$DXY back to 102TVC:DXY looks like it wants to go back to 102, almost 103.
Downtrend was broken with gusto; multiple bullish candles to confirm the change in trend on the monthly chart. Looks primed and ready to hit 102/103 and most likely surpass those levels after contending with it a second time.
This will most likely be a headwind for emerging markets. So it may be prudent to trim or hedge there if you have holdings.
EM SonarWhen will the sonar break symmetry? The sound is harsh, telling us to go away, disgesting information and giving a message back to more overleveraged markets!
VEMT Daily - Continues to look constructive Been accumulating this ETF for a while and banking a decent monthly divi. Bullish set ups continue to form. Yesterday we saw a bull flag break and an inverse H&S will be confirmed above 38. Targets are 39 area
VEMT Daily - Bullish action continuesI've been bullish this ETF for a little while and it has been consolidating and building nicely. There is another bullish break of a flag - still looking for 38.50 target initially. Been paid a nice cheeky monthly dividend while we wait.
EEM. Emerging Market Index Fund. Correction could be over.Earlier I posted maps for EEM consolidation (see related).
This last sharp move makes me thinking of a completion of the correction.
Then we got the contracting flat WXY.
Triangle could be the next alternative ABCDE.
Target will be at 75 then.
Stocks, Forex, Commodities & BondsStocks are at elevated levels and I'd say in bubble territory. But in my opinion the true bubble starts now, as no matter what happens now Central banks will try to prop it up. Essentially the biggest risk is in bonds and currencies, not everything else. I do believe there will be a big sell off at some point and I do believe that over the next 6-18 months we will get a major top where everything will crash a lot. Potentially a bigger crash than the one we got in March. Have shared my view on stocks going parabolic lots of time and have made the comparison with 1998-2000 many times, which is exactly what has me thinking stocks will go up a lot before collapsing. Can and will we get several corrections along the way? Sure. But remember we had a major correction in Dec 2018, March 2020 and we had two major corrections in the Sep-Nov 2020 period.
European stocks look much weaker and I am not a big fan for now. In USD terms they might do as well as US stocks, but in % terms in EUR they probably won't. Asian stocks seem much stronger overall, especially in USD. Most liquidity and momentum is in the US, but Asia has the fundamental case for now. Asia stocks with massive breakouts and clean charts. US massive momentum too, with the top 3000 US stocks looking very clean and strong. Another very big breakout. All these explain why I see things going parabolic for now. People forget how depressed most stock markets have been globally for years (when measured in USD). Many have performed very poorly over the last 10-20 years and the global stock market capitalization has only doubled since the 2009 peak. Nasdaq is up only 170% since the 2000 peak and tech is eating the world. So yes, the true mania begun since we got the election and vaccine news out in November.
When it comes to the USD and the DXY, I think we are going to 80-82 over the next year where we could get a major bottom. For now yes we might see a major correction and a pump in the USD as sentiment is stretched, the USD is extremely oversold and at support. However most crashes happen from oversold levels, not overbought. The new US administration will print a lot, with more stimulus coming... So maybe we initially get a sell the news event because everyone is expecting it and then start going back up again once they really start taking action. Against EM currencies the USD has shown a bit of strength recently, after hitting key support. Yet it remains weak and doesn't mean it can't go lower. With Biden and Yellen I can't see how they won't do everything they can to keep the dollar low. Eventually they will fail. In my honest opinion the USD has one major cycle up before it goes away, but truth be told... for now it has many things going against in. Cryptocurrencies, CBDCs, Fed doing the most QE etc, Biden promising to be very irresponsible and so on.
Maybe this goes on until stock markets get so crazy, maybe until they are forced to hike rates, maybe they have to go negative because inflation gets out of control, maybe they tax corporations too much, maybe post covid when people have to pay back all the loan/rent payments that have been deferred we get the real crash. So this could take quite a few months before the dollar rallies. Many have seen me share my 2008 USD fractal where the DXY goes to 80-82 and then goes up again... but there is a big chance that the USD cycle has turned and things could be way worse for the USD. So yes short term I can see it go up 2-3% and stocks drop 10%, but nothing more than that. The VIX kinda agrees as it is close to key support again, but looking weak. If the VIX looks weak there isn't too much to expect from the USD as people won't really need to get in.
Finally when it comes to commodities, most are at pre-Covid crash levels or higher. Gold & Silver don't look that strong, but I don't really expect them to go much lower yet. Their main issue is real yields going up or the USD going up, so I prefer Cryptos and stocks as we are in a more risk on environment. Yes they have potential and maybe everything pumps, but actually buying Oil or Copper might be a better bet as they will be used when governments start printing to build stuff etc... If inflation is truly back, these are much better especially in environment where oil and copper supply has gone down. For oil I think there is 0 chance of going back that low. That wipe out in April has the potential to really be the cyclical bottom for inflation, even if that's for the next 1-2 years as inflation picks up before it goes down again. Personally not the biggest fan of the reflation trade, but for now that's where the momentum is so I wouldn't won't to go against it. Yes copper and oil could drop short term along with everything else, yet I don't expect them to lose their key breakout zones. Essentially everything could correct short term as yields go down again (retest breakout), Copper down (retest breakout), Stocks down (retest diagonal), DXY up (retest break down) and then continuation to the upside.
EMUSDTEMUSDT
Buying around 0.0038 - 0.00347
1 - 0.004125
2 - 0.004480
3 - 0.004866
Stop, fixing below 0.00335
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!IDX, !KOSPI, !THD Long Entries for July 28Up 1.8%, the breakout here is clear for the EM as I called 3 weeks ago. This was assisted with Asia slowing in 2017/18. Asia looks better at this point because Asia technically slowed down before the West. !THD and !IDX are good longs and I will be taking them.
13:19:40 (UTC)
Tue Jul 28, 2020
EMBTCEMBTC
Buying in the area 0.000000494 - 0.000000435
Goal 1 - 0.000000545
Goal 2 - 0.000000670
Goal 3 - 0.000000810
Breakdown 0.0000004, price may fall below
If you like what I do, put 👍 and subscribe
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$DXY $UUP - Movin' on $UUPWith economic uncertainty continuing to grip the financial markets, the US Dollar continues to be in play. As global investors flock to US assets, both stocks and bonds, in search of above average returns and safety, the US Dollar continues to strengthen against its G10 and EM counterparts.
As this trend continues, a key level to watch for the Greenback is its Weekly Resistance Level of $98.19 (Orange). If the US Dollar can breach this level, we expect the Greenback to move higher.
$EEM - Emerging Markets Under PressureAs volatility has come back to the global markets with a vengeance, one headwind that continues to blow even stronger continues to be the US-China trade war. On August 2nd, the US unexpectedly imposed additional tariffs on Chinese goods, with the Chinese now threatening to retaliate in kind. As a result of this renewed volatility, Emerging Market stocks ($EEM) have been rattled heavily over the past few trading sessions.
On a technical basis, $EEM prices are below all three of its EMAs, with a death crosses forming on i) the 10-Day and 50 & 200-Day EMAs, and ii) the 50-Day EMA and the 200-Day EMA, something that has not been seen since May. Further, its RSI continues to fall, indicating that momentum is quickly increasing to the downside as global investors lose faith in Emerging Markets. Lastly, $EEM prices seem to to be in a downward trend since July 25th, with the EEM/SPY price ratio continuing its march lower, as global investors (continue to) invest in the US over Emerging Markets.
Given the increase in rhetoric between the two economic giants, Emerging Market stocks are currently under heavy bearish pressure, with no end in sight. If these pressures continue on the space, we see $EEM heading lower to $38.45 as its next stop.
$USDBRL $EWZ $BVSP - Brazilian Real Under PressureAs market volatility has come back with a vengeance and the US Dollar continues to remain strong, one EM currency that has been hit particularly hard this year has been the Brazilian Real ($USDBRL).
Sluggish growth forecasts, coupled with waning support for the Brazilian President has sent the Brazilian Real to its lowest level of the year thus far. The sharp declines have also been fueled by uncertainty over the US-China trade talks on the macro level. The combination of the two forces, the external macro headwinds and feeble domestic economy, have been a perfect storm for the under-performance of the $USDBRL in 2019.
Further more, on a technical basis, the $USDBRL continues to show deterioration within the Brazilian Real, with the 10-day EMA being a strong support for the currency pair.
We believe if this continues, $USDBRL 4.25 is the next stop.
EEM - Short - $40 targetEEM which can be thought as "Emerging Markets" looks fucked to me.
Short this.
Baring a sudden trade deal this week (unlikely), EEM could see sub $40.
The puts I purchased last week have already doubled in value. :)
From a TA standpoint, let's review.
Price is below the green line (bearish) but bounced off support in the last 10 minutes of the trading day.
Thank you algo panic buying.
The price could also find support at the .618 line or $40.62 but the .786 price of $39.47 lines up rather neatly with the supporting trend line.
Time frame: end of the month, possibly by 5/17.
Expect a Downturn in EM If you Expect a Downturn in the USIts not quite a great idea to invest in EM if one is expecting a downturn as EM will be significantly hit from drying up liquidity via outward capital flows and lower investment. Happened in 2008 with the liquidity crisis and again in 2011 with the EU sovereign debt crisis. We can see this relationship between developed markets and emerging markets through a correlation coefficient between the S&P 500 and the most liquid emerging markets ETF in the world EM. Moreover, EM is vulnerable to a Chinese financial crisis as well if the Chinese can't figure out how to lower their debt levels which they really havn't yet. Either way, I would avoid EM at these price levels.
Shanghai Composite / S&P 500 ratio & The USDHKD PegUnsurprisingly, similar to the currency, the outperformance of the Chinese stock market vs. the S&P 500 falters when the Chinese currency can't be sustained. Not quite as direct of a relationship, but this clearly affects emerging markets, which are highly indebted to the dollar.
This is visible if you go back further as well - the broad rolling emerging market problems all occurred starting when the USDHKD peg was hit in April 2018. April 18th, 2018 was a pivotal day in that regard. Also, it's no surprise that EM currency problems are starting to suddenly become problematic once again....
USDHKD PEG and the Chinese Currency..Unsurprisingly, right as the USDHKD Peg hit it's 7.85 limit, China lost its ability to prop up the Yuan, and the Yuan started to fall once again. This is further confirmation that the Yuan is subject to dollar pressure, and Hong Kong is China's "release valve" for dollar funding pressures. When the peg gets hit, the CCP has a difficult time keeping the RMB afloat.
Impulsive move in play for USDTRY Here we are witnessing a very interesting move taking place for the Turkish financial system. After finishing a clear corrective ABC sequence since the August highs we are now in the early stages of an impulsive move to finish the more broader 5th wave in a very large sequence.
For those tracking the updates in USDTRY in the previous charts (see attached: "Starting 5th wave looks imminent..") this is the move we have been waiting for over the last few months. Finally it is here, time to stick the knife in and cause maximum pain for Turkey.
The fact that we are rallying in an impulsive manner means we are going to eventually crack 6 + and possibly even 7.80
Continuing to watch with interest, all positions are fully loaded here as has been the case for months. Time to sit on our hands and enjoy the moves.
Thanks
Same flows in USDPENHere we can see the 5th wave targets for this large sequence. From a birds eye view we have the potential to extend as high as 3.67 over the next few quarters.
Recommend buying support here at current prices with targets at 3.49 up to 3.67.
Best of luck
