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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$JNK looking heavy …

note, $JNK found support and the market rallied.  we had a pattern completing at 35 which held but it certainly looks heavy to say the least.

we need to watch this one, closely.  if you simply look at the picture presented we have never closed below the yellow boxed area since the rally started and 06/2009.

Institutions bail out of risk assets when they are “risk adverse” … watch this closely.

sure looks heavy, hugh?

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Meanwhile ….China, DB, Junk Bonds

GoPro

Shake Shack

Yahoo

Twitter

Facebook

hate to say it …but, um, who cares?

There are some MONSTER currency moves going on right now … watching China like a hawk.  Is is starting down again against the USD?

Pay attention to this, THEN look at the “other” stuff …

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DB – largest holder of derivatives “alive” for now …nice 5 waves down into the .786.  Expect a rally into high 20’s then back down again …?

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JNK … nice bounce from the 35 pattern.  hit .786 of last swing and starting back down … hmmm?  all good, all quiet on the Western Front, nothing to see here folks move along?  Watch this one – closely.

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Junk Bonds …boom, right on the target area. K E Y !!

Junk Bonds … just think of em’ this way…risk investments and a yield play.  in a volatile world, they aren’t so smart so institutions try to get out of them.  keep it simple … note coming into the 2009 low they were crashing .. a nice bounce and then meandered around into June 2014 then started to crack.  Most recent price action has seen some heavy selling pressure w/ the first noticeable gap down occurring last week AND (this is important) the lowest weekly close since August 2009.

Note the dashed black boxes .. those were all attempts at trying to get below but were defeated.  What’s the positive spin?  Well, as you can see from the first chart below this level (35) was ID as a pattern and it hit and held for now. Why for now?  Well a gap down and some “selling candles” make it probable that we could lose this level to the downside. HOWEVER, if history is our guide, their has been a snap back rally since 2009 each time this level was defeated .. so, watch for strength!  a small, dead count bounce isn’t good and will tell us if something is a foot at the circle K so to speak ….

JNK

Here is JNK as of Sunday night … over the coming days, expecially Tuesday, monitor this pattern closely for a directional bias and a “risk on” vs “risk off” appetite w/ regard to volatility.

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Hope your having a good end to your weekend.

Bart

post w/ the gang over @seeitmarket about Germany and some more …

the “powder keg” in this global, interconnected financial world appears to be Germany w/ $DB woes and Volkswagon and a bunch of debt.  here’s a post about that:

German DAX Weighed Down By VW Scandal And DB Concerns

over in the states we also need to watch a very key level in the JNK ETF.  Essentially, Junk Bonds are risky low grade bonds and show the appetite of the credit markets.  In this day and age of grabbing for yield, somewhere, they have offered a speculative means to grab some yield, maybe.  But in times of volatility they fall out of favor … as you can see by the chart below, the $JNK ETF is getting ready for the test of a very key level – 35.  It’s nothing more than a pattern but you can see since the “recovery” of 2009 this level has been key.  Watch this level, closely.

also, take a note of the $DB overlaid on top of $JNK.  they shake and move in the same fashion …when the worlds largest holder of derivatives is shaking and jiving w/ $JNK it makes me perk up.  now for the “if-then”

IF

$JNK PATTERN HOLDS IN AROUND 35

THEN

$DB HANGS ON AND LIVES ANOTHER DAY

ELSE

THEY BOTH GO DOWN – ALBEIT – PRETTY HARD (?)

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