shows a diveregence now with this pair, and, although a gut feeling - something tells me that chances are we may see a trend change in future, and EEM will outperform the US market.
Another thing to add to this is also timwest's chart (one can never praise this chartist enough on the site) - the discrepancy and distance between EEM and SPY became so large, it feels as it has to narrow down. But it is only up to "you, the reader" to decide what he feels may happen
- On one side you have US markets with a huge run over 2013 and 2014, where we've been expecting a drop that never happens
- On the other, EEM that has been going lower and recently turned up a bit. (one can note some run-ups of such countries as Korea, Thailand, India, Brazil, Turkey and even Japan sits on the verge of braking up).
So again 2 scenarios -
1) EEM breaks lower, Spy remains in tact or goes higher
2) EEM breaks up, and SPy gets its sell-off and correction.
If this idea - - holds by years end, and so far it does - then scenario 2 is quite probable. But first this pair needs to overcome the 23 .
Must quote today's comment from Tim "We are nearing the end of the end of the end of all of the positive forces holding up the market."
And my deductions agree fully with him on " I think the trade will be "out of developed markets" and into "emerging markets" for the next year"
I must include timwest's ideas that altogether will show which scenario i am leaning to and i urge you to read his comment-update on the forecast chart
PS - dear Tim. Never think that your charts are useless - i try not to post much and distract you from doing research, but if you wish i would leave notes on charts i think are good ideas (on top of the stars and thumbs up). This chart and idea is wholly made from your ideas - but added a whole deal of confidence to my feelings of the market.
"It's about time to update this as we face the final three months of 2014. Earnings have been levered through stock repurchases and stock prices have been leveraged by margin accounts across the country. The entire balance sheet of the financial system has been leveraged through the Central Banks around the world. We are nearing the end of the end of the end of all of the positive forces holding up the market. The hard part to figure out at this moment is where all the money will go that is resting in stocks and bonds.
The final flush down in gold is happening with gold under $1200 as the ultimate "fight against money printing" seems to be falling on its face. The believers that Gold would save their portfolios are being truly challenged because as we all know, burying your head in the sand (which gold investing can be likened to) is not an investing strategy. Commodity prices are tumbling across the board with ample supplies of corn, wheat, soybeans together with crude oil, heating oil, and even natural gas, are keeping inflation at bay. Even though employment is gaining, apparently it is only in people aged 55 and up that have found work since the recession started and magically, their wages have not risen.
So, we still face a demographic headwind of people retiring who don't spend as much as they used to and will continue to spend less each year, keeping a cap on the US economy. There simply aren't enough new spenders to keep the game of musical chairs going. We simply won't keep trading up from the condo to a small single family house, to a much larger single family house, to the mcmansion. That game is over. The economy won't be sustained on massive spending on houses anymore, we all know this. The economy will grow on getting more transactions taxed that have heretofore been untaxed. Enough waxing on.
I am thinking that year end could be lower than I forecast, but at this point let's just take one day at a time. So far, so good for this year. I don't know what will trigger investors to start to sell stocks and I don't know what they will buy. Cash is still a wasting asset, note the negative interest rates in various places. We all just need to realize that deflation is still the bigger risk and emerging markets may be the beneficiary as they are growing. So, I think the trade will be "out of developed markets" and into "emerging markets" for the next year (as a whole - details to follow)..."