Friday, March 4, 2011
Emerging Markets TA morphs into a big picture riff
Oil is once again set up as a supposedly fundamental indicator, just as it was pre-crash in 2008. Yet, just as was the case then, oil is not causing inflation but rather, can bring about the 'threat' of its opposite if it hinders reflated economies to a strong enough degree. This (a deflationary 'event') of course, is what is needed by the Wizard if he wishes to keep bullets in his policy gun (the gun being an intact and calm US Treasury market). Oil is a headline manifestation of inflationary policies to date. So too is the strife in the Middle East. So too are rising food costs, rising materials costs, etc. Revolution comes through economics and in particular, when the least able to incur the effects of inflation, can no longer feed their families.
But this post is trying to outgrow its original intention, which was to review the daily chart of general emerging markets through the iShares ETF. I had to take another limited loss from the short side yesterday. No worries, because while I am trading a potential rebound in the 'all one market', I definitely know that a big picture plan will soon present itself. So meanwhile, I'll screw around with the hornet's nest, while managing risk at all times.
As to EEM, a potentially healthy decline would have brought it to significant support at around the SMA 200. But the manic global investment casino has taken on characteristics that are not so healthy, as speculation remains in force until eventual termination. It is a sign of speculative markets - and I am not picking on the EM's here (they are a favored area in the longer term), I just found this chart interesting - that they don't tend to have an attention span required for 'healthy' corrections.
So be it. Nominal markets continue to be like bee hives. Better to watch the indicators that will end up influencing the greater trends; GSR, USD, sentiment, bond spreads... that kind of stuff.