iShares MSCI Emerging Markets Index ETF (EEM) hit a high of 40.23 two weeks and has since begun to show signs that it may be starting a correction. At that high EEM had advanced 12.62 or 45.71% off the 27.61 bottom reached in January 2016. A move down to at least the uptrend line is looking likely now before this ETF is ready to make another run higher, if it is to do so.

Short-term bearish signs:

Weakness seen at long-term resistance zone hit two weeks ago.
Weekly Spinning Top or Doji candle occurred two weeks ago.
Last week broke below prior week low – although not by much. Prior week low was 39.38 while last week’s low was 39.31.
EEM closed at 39.39 last week, only 1-cent above prior week’s low.
RSI at overbought level that previously led to declines (see prior chart).
61.8% Fibonacci retracement (38.95) of downtrend off September 2014 peak completed three weeks ago.

Note that EEM broke out of a Head and Shoulders Bottom (HS) reversal pattern in July last year, then pulled back to test the neckline as support in November/December. Price was rejected at the neckline with a Double Bottom and then rallied over the next 13 weeks before hitting resistance at 40.23 two weeks ago. That high has a good chance of holding an advance for now given that it’s at resistance of the long-term uptrend line (bottom ascending line of multi-year Symmetrical Triangle) and at two 141.4% Fibonacci extensions from two recent down swing measurements.

Whether 40.23 is the end to the long-term advance or not remains to be seen. But for now, given the bullish behavior in relationship to the HS breakout and subsequent follow-through, new highs remain a possibility following a retracement. The measuring objective for the HS pattern is above the recent high at 43.17.

A decisive drop below last week’s low of 39.31 gives the next bearish signal with a daily close below that price level confirming weakness.

January’s analysis on EEM can be seen HERE

Bruce Powers, CMT
Chief Technical Analyst
http://www.marketstoday.net/

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.