timwest
Long

Emerging Markets - EEM - Uptrend and Bearish Sentiment

AMEX:EEM   ISHARES TRUST MSCI EMG MKTS ETF USD DIS
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It looks like the long term downtrend is ending here:
There is a lot of consensus that the Trump Presidency will crush emerging markets by way of the destruction of trading partnerships and new trade wars. But that post-election decline has fully retraced AND with all of the fears of euphoria in the US with equity prices at all time highs and appearing extended in price and appearing extended in valuation, this Emerging Markets ETF is certainly showing a very different picture. The fears may be overblown about Emerging Markets AND there may be plenty of upside now that the sellers have sold all they can sell. Old buyers are sellers here at the 38-42 range, which it tested last year and now appears to be going for another test here in the first quarter. (January high 37.62, 37.38 last).

Tim 10:39AM EST January 31, 2017
Comment: So far, so good. When you click on the ">" to update the chart, the background should be GREEN since it is profitable so far. Not sure why the background is painting RED/Pink. Strange.
Comment: If you divide the SPY by EEM you see how poorly EEM has performed over the last 5-10 years. However, what you are starting to see now is a base form, which is a sign that the downside momentum has turned. Time will tell, but I like how it looks. I also hear how Emerging Markets have extremely low valuations now and given their poor price momentum, no one is interested just yet. It's very funny how Wall Street works. When the price is cheap and not moving up yet, everyone thinks that "it is not time to buy yet" and then once the price picks up some momentum to the upside, then buyers say "Oh, no! I can't pay up to buy it now. I'll wait until the price pulls back to where it was before where I wanted to buy it." Then there is never a pullback to let those buyers get in and it runs and runs and runs much higher. Then your job, as an investor, is to wait until those "buy the dippers" can't take it anymore and finally jump in. That is your clue to get out (at least from the short-term perspective). Enjoy the uptrend in $EEM vs $SPY. I believe that every 1-year, 3-year, 5-year, 10-year period from here will be positive for the ratio, which means I think the EEM will beat the SPY. Why? Valuation and timing.
Comment: So far, so good. $EEM is still cheap relative to $SPY and Trump hasn't done anything to destroy trading between any countries. Fears = people have already sold. Remember that. When you "hear the bears singing on the news channels" it means they have already sold and have already impacted the price.

Cheers.

Tim 12/3/2017 11:00PM EST
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Love this one
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Comment on the last update: Buy the fear, sell the greed.

Speaking of EEM - are you in it on a aggregate level, like EEM and funds for specific regions, or go lower to diversify per country?
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2use 2use
@2use, To let you know, i actually keep a per country fund portfolio, mostly Asian, not that much Europe, and even some BRIC (per country)
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Is this more of a China issue, since we need to know if this is single country related, or overall EM related. Indian stocks and many other companies in EM are hitting uplevels. We need to watch carefully, but the trend is definitely lower highs and lower lows.
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timwest kenny1924
@kenny1924, The trend is also higher lows, so basically we are in a large triangle over the chart time frame since the peak.
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Beautiful move so far.
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EEM and VWO are great ETFs that are active, volatile and play the Emerging Markets in a single bundle. No one has made money in a few years on this one unless one was trading it. The Options are pretty active on them also, and they have LEAPS also.

I have been an avid watcher of both of these, and play them also. VWO gives a bigger dividend (I think), but EEM has great volumes (I think). In either case, if you overlay them, they are almost equal.

I would agree that this is coming out of a slump and I have read many articles talking about how it is going to be the turn of the Emerging Markets to move up.

I am going to play Put-Sells on it in the interest of acquiring but a couple of days ago when I looked at it for the Feb expiration, I was not impressed with the premium on the option. So, I did not do it, but I plan to do it and aquire some ETF shares with a few Put-Sells.
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timwest kenny1924
@kenny1924, Options prices are low these days, so that means low-premiums for cash-covered-puts.
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Given the volume profile, would you wait a break above 42-43? Otherwise, i indeed noted this in the last month and putting some more strength in EEM. Nice to see common opinions. I also heard a lot about germany and Italy post US elections, while EU on average made a 7-8% run since dec 5th
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@2use, I think waiting for that high is playing it too safe. The Election level is probably the most important level and now that it is above it, it is free to move up. Sentiment couldn't have been any worse for Emerging Markets over the past 3-6 months. I'm curious if there is a way to have measured it. Perhaps "money flows" into emerging markets equity funds as compared to "money flows" into other funds. Perhaps that could show just how bearish people have been.
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