The Weekly percentage comparison chart below shows that there
has been a divergence in market movement, so far, this year
between the SPX and EEM. This year, the SPX
made a higher closing swing high than that made in 2011, whereas the EEM did
not. Both have turned down from major resistance recently.
The Weekly chart below
of EEM shows price sitting at a confluence point in between the 50 & 200
smas and the mid-Bollinger Band as of Tuesdays' close. A break and hold below
the 200 sma (say, 39.00) could send price down to around 35.00. A break and hold
below that level would find the EEM dropping into a low-volume zone (as depicted
on the Volume Profile), through which price could drop rather quickly.
Since the SPX and EEM
have trended fairly closely with each other up until this year, and
since they're both up against major resistance levels, it's worth monitoring
these two to see which way global sentiment lies in the short term. A global
"risk on" environment would find both trading higher, and a global "risk-off"
environment would see both trending lower…if markets remain worried about
global risks, but continue to support the U.S. markets, we may see the SPX trend
higher (perhaps at a slow, choppy pace) while the EEM trends lower or
sideways.
