Emerging Markets, EM Currencies, Patterns and an example

I’ve posted, more than once, how I really love when a market makes 3 waves to a new high or low and then fails in the opposite direction. It’s the classic “expanded flat” and – if you can get the C wave right – it’s a great trade to take to new highs or new lows.

the chart below is of the USD vs Singapore:

  • note the highlighted box – see how the market goes up into a new high in three waves?  CLASSIC B wave ….
  • note the monstrous bearish divergence

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Here’s the potential count:

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note:

  • in the past, it didn’t have bullish divergence at the lows to get going so we are either finishing wave ‘c’ and/or we have one more wave to go down into the 1.618*a = c w/ the blue measured move arrow.
  • either way, believe we are coming to the end.

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note:

  • the subdivison of the circle part down doesn’t lead to a “clean” 5 waves down into these lows so I’ll watch for an UP/DOWN sequence to complete.  this could be the low BUT my bias is the UP/DOWN into the low before entering a position.

what does this mean for the Emerging Markets Equity Exposure?

below is the Singapore Dollar (as an example) withe EEM overlaid INVERTED in the blue line.

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NOTE – very strong correlation to EM Currencies and EM Equities

Here’s the EEM:

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Note:

  • .707 retrace and 1.4142 extension caught the lows ….see math on chart
  • blue measured move arrows are complete – see how that corresponds to the low in Singapore Dollar?
    • however, the red measured move seems to be the next logical target IF the up/down scenario plays out
      • also, note how the measured move takes us back up to the year long support cliff

SO, now for the “if-then”

IF the US Dollar is finding the low against the Singapore Dollar THEN the EEM bounce is coming to an end.

Bart

PS — had to do it … JNK and EEM sure look alike.  I wonder why ….. 🙂

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