Per reader request, let’s take a look at the current movement and structure in the EEM Emerging Markets ETF and see a possible fractal Elliott count as well as simple support levels to watch.
Notice first that the EEM (MSCI Emerging Markets) bottomed ahead of the US S&P 500 and has rallied stronger than the US (S&P was up roughly 40% while EEM peaked at roughly a 75% increase).
As this shows, Emerging Markets can be more volatile (and profitible during up-moves), so guard your risk closer.
We had a strong move off the early March lows that - so far - has terminated in early June. A quick note on the Elliott structure - it probably counts better as a correction - but for now I’ll keep the main count as a 5-wave fractal structure that appears to be in a corrective “B” Wave up which is awaiting a “C” to come. We’ll keep watching it closely.
The key thing to note is that price supported each time we tested the rising 20 day EMA (offering good low-risk buy-in opportunities) and now have finally formed a clean negative momentum divergence. If this count is correct, the volume divergence has formed on the terminal (fractal) 5th wave which suggests a pullback/retracement is due - which appears to be what is happening.
Volume has held roughly steady, declining somewhat from March while the SPY and other US ETFs have clearly shown a negative volume divergence.
Key levels to watch: If we break above $34, then odds are we’ll continue higher - but do be aware that - like the S&P 500 - a bearish head and shoulders pattern could be forming (placing us now in the right shoulder). $33 could also be resistance due to the prior highs from May.
Otherwise, the $30 level is obvious support which, if broken, would lead to a possible continuation move lower.
Until then, let’s keep watching the chart for additional clues as they develop!
Corey Rosenbloom, CMT
Afraid to Trade.com
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