This Great Graphic from Bloomberg is a weekly bar chart of MSCI Emerging Market equity index. In H2 15 and H1 16, it carved out a head and shoulders bottom that we identify on the chart. We also drew in the neckline and noted the minimum objective of the inverse head and shoulders pattern.
The index has risen 12.25% in Q1 17 to approach the objective. Technical indicators also suggest scope for a correction. The Slow Stochastics have turned down. The MACDs are about to cross lower.
A break of 960 would be the first preliminary indication that the impressive rally in Q1 is over and the index has approached levels which are potential turning points. An advance through 971 would suggest that it is premature to pick a top, but we would be attentive to near-term reversals, and like the higher levels as an opportunity to lighten positions.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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