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Great Graphic: Emerging Market Stocks

Summary:

 

MSCI Emerging Market Index is up 12.25% here in Q1.

The index is approaching long-standing technical objectives.

Look for profit-taking ahead of quarter-end as fund managers rebalance.

This Great Graphic from Bloomberg is a weekly bar chart of MSCI Emerging Market equity index.   In H2 15 and H1 16, it carved out a head and shoulders bottom that we identify on the chart. We also drew in the neckline and noted the minimum objective of the inverse head and shoulders pattern.
 
The index has risen 12.25% in Q1 17 to approach the objective. Technical indicators also suggest scope for a correction.  The Slow Stochastics have turned down.  The MACDs are about to cross lower.
A break of 960 would be the first preliminary indication that the impressive rally in Q1 is over and the index has approached levels which are potential turning points.   An advance through 971 would suggest that it is premature to pick a top, but we would be attentive to near-term reversals, and like the higher levels as an opportunity to lighten positions.

 

MXEF Index

MXEF Index

- Click to enlarge

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Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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