Figure: iShares Emerging Markets Index ETF (EEM), daily (top half), and relative strength of EEM versus the S&P 500 SPDR (bottom half). Notice that EEM has crossed above its 200-day moving average for the first time since last July. The level of this moving average, $42.39, is now a support zone. EEM is now also higher than its October high point.The bottom half shows that emerging markets (EEM) were weaker than the S&P 500 (SPY) starting from August 1 through early January. However, that trend has reversed itself, as evidenced by the trendline break on January 13, 2012.
Figure: iShares MSCI EAFE Index ETF (EFA) weekly, and relative strength versus the S&P 500 SPDR.
Top clip: The price of EFA remains below its October 2011 peak, unlike emerging markets (EEM) or SPY.
Middle clip: The relative strength between EFA and SPY has been in a downtrend since October 2009.
Bottom clip: The MACD of the relative strength is far below zero, suggesting that EFA has the potential to recover some ground lost relative to the S&P 500.
Signalert Asset Management, LLC