Potential opportunity for contrarian investors

EEM

Emerging markets have been moving within a very large symmetrical triangle since 2011. The top of the triangle lies somewhere around $42 on the iShares Emerging Markets ETF chart (EEM). The lower part of the triangle lies around $38 at this point. A breakout from either of those levels (up through $42, or down through $38) would be significant. Given the negative sentiment on these markets of late, the contrarian in me makes me wonder if we will see a return to, and possibly a break, of the upper limits of the triangle formation. That remains to be seen – I wouldn’t recommend trading this sector until such a breakout occurs. Conversely, a breakdown through $38 would imply  a shorting opportunity.

Keith’s speaking engagements

We are now publishing my upcoming BNN television appearances, and speaking engagements on a separate page of this blogsite. Visit the “Television & Speaking Appearances” tab on the homepage.  Or, visit the homepage at www.valuetrend.ca  for  updated  appearances.

I will be speaking in Cambridge and Guelph in late April and early May. You are invited to attend either of these free presentations where I will be covering technical analysis techniques taught in my book, Sideways. I will also be speaking about developing trends for markets and sectors in 2014. Details are available on the tab mentioned above.

I am also doing a presentation via teleconference for the Winnipeg Chapter of The Canadian Society of Technical Analysts Anhang Room, 2nd Fl., Winnipeg Millenium Library Wednesday April 2, 2014. For further information call Allen Hosey 453-3241 or email [email protected]

If you have a group of 20 or more individuals interested in booking Keith to speak on investment planning or technical analysis, please contact Cindy McIntyre at [email protected]

8 Comments

  • AT $39.50, EEM-N (EMERGING MARKETS I SHARES) WERE TRYING TO BREAK OUT ABOVE A DECLINING TRENDLINE THAT STRETCHES BACK TO OCTOBER OF LAST YEAR. SIGNS OF SUPPORT ARE SEEN IN SHANGAI COMPOSITE AND BRASILIAN BOVESPA (AND MEXICO) AS WELL BUT THE TREND AS YET TO MATERIALISE. TODAY’S CLOSING AS SEEN A FADING BOUNCE ON EAFA MSCI AND EEM. JOHN J. MURPHY IS POINTING TO STRENGH IN EMERGING BONDS AND CURRENCY AS WELL. IS THIS JUST AN OVERREACTION TO MARKET WEAKNESS (SPY) OR THE BEGENNING OF AN EARLY FLIGHT TO QUALITY(TLT)?

    Reply
    • Good question–we shall see I guess.
      I am now 17% cash in my model equity account. The continuation of reversal days (high starts followed by low close) makes me wonder about the NA markets ability to hold the highs.

      Reply
    • I’d give it good odd’s, but like I said, I like to wait and see it actually break. If you are willing to ride a mental stop loss, its not a bad bet from here–sell if it fails at the breakout point mentioned in the blog

      Reply
  • Keith: you mention your model equity account. What percentage of the entire investment account (fixed income and equity combined) would this model equity account be? Thanks.

    Reply
    • Terry–every client has a different asset allocation according to their needs. We divide the money between our equity model, and one of two fixed income models. So an income orientated client may have more of an income model–lets say 60% in our fixed income model, and 40% in the equity model. But a growth seeking client may have only 30% in the income model.
      The point is, each model is managed as a separate entity with entirely different objectives. The beauty of doing it that way is that we report our equity results to clients on a separate basis, so if a bear market comes along–the equity results don’t get mixed in with the bonds to make them look better. I’ve always said that its the bear markets that separates the men from the boys (or women from the girls) in the world of investing. We like our clients to see how we protect them during rough markets–and its easy to see when the assets are separately managed.

      Reply
  • Keith,

    speaking of contrarianism, what do you think of the beaten down coal sector? Would you consider that sector, or is it on a long bearish trend that shows no sign of ending? Thanks.

    Martin

    Reply
    • Lower lows and lower highs suggests the downtrend is still in place. I don’t buy until a base is established, and a breakout past the last high happens.

      Reply

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