A faint light is often all that is cast upon truly outstanding positioning strategies before they ready. Fundamental analysis, awareness of monetary policy developments, positioning conditions and other trend characteristics followed allow candlestick charting analysis to shine needed illumination. Martin B. McGuire
Tuesday, July 15, 2014
Are Emerging Markets Ready to Act Similar to Taper Tantrum?
Andrew points to a position taken that would benefit
the put spread buyer of emerging market (MSCI TR) index ETF (‘EEM’) if
conditions similar to those seen in the ‘taper-tantrum’ last year develop.
I would note that the volume of late has been very
soft on the EEM etf.In late-April when
the low of 40.54 was reached, the 15 day average volume was 73m.Today that average is only 32m and it has
been weak throughout the recent advance.This declining volume has accompanied a price advance of 10% to this
morning’s high of 44.32.
Right now, there is a ‘bearish engulfing’ developing
in this emerging market etf.Back in
late-May 2013, after some initial stray comments about tapering, a similar candlestick
formation was seen.The next day, the
etf fell roughly 1% and fell by 15.8% over the next month.As a reminder the 10yr Treasury yield also jumped
from 60 bps over that period.
Finally, the VIX was at relatively low levels in
late-May ’13 and jumped following.We are
currently at relatively low volatility levels again having recently touched
The bottom line here is the question of whether the
above mentioned developments point to growing concerns for a less accommodating
Federal Reserve than previously expected.A rising U.S. long rate will pull money out of emerging markets again
similar to the way it has been attracting foreign buying on the back of low