Monday, March 24, 2014

Positive Divergences Amidst the Negative Ones

Saturday's post looked at divergences in the new high/low data among U.S. stocks.  When hundreds of shares are posting fresh one-month lows despite market averages hovering near their highs, you know there's weakness under the surface.

With today's drop in stocks, we touched a five-day intraday low in the major U.S. indexes.  I can't help but notice, however, that we failed to print five-day lows in many emerging markets (EEM), including China (FXI), Brazil (EWZ), and India (PIN).  Until recently, EM equities have been downside leaders.  Should that dynamic change, we could see some fresh growth stories--and asset reallocations--on the horizon.

And, speaking of divergences, we've seen net redemptions in the shares of many U.S. equity ETFs since the start of the year, including SPY.  During the most recent weakness, however, we have not seen net redemptions.  What would it take to get institutional investors back to gobbling up equity ETFs?  Perhaps a global growth story, sparked by fresh EM interest, would do the trick.

On the radar for now--

Further Reading:  Five Ways to Improve Your Trading

2 comments:

Scott Trader said...

This was a very helpful post Brett, as was Saturday's.

Thank you so for helping to teach us all how to look at markets in ways not peddled in the mass market.

James Hawkins said...

Good post, Brett. You're perspective is helpful.