Conclusion, Investment Implications, Strategy

The iShares MSCI Emerging Markets ETF (EEM) is in an emerging trend of outright strength and relative outperformance versus the S&P 500 amid recently expanding investor asset flows.  A sustained rise above the 48.95 area would target an additional 13% rise to 56.17.  This is an Asbury Value trade idea.

Analysis and Rationale

The iShares MSCI Emerging Markets ETF (EEM) seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities.

Relative Performance

The upper panel of Chart 1 below plots EEM daily since July along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel plots the daily relative performance of EEM versus the SPDR S&P 500 ETF (SPY) along with its 63-day (quarterly) moving average, the latter which identifies the Strategic trend of relative performance.

Chart 1

The green highlights in the lower panel point out that EEM began a new trend of Strategic (63-day, quarterly) relative outperformance versus the SPDR S&P 500 ETF Trust (SPY) on Jan 18th, after previously underperforming since March 2021.  Meanwhile, the upper panel shows that EEM is edging above its 50-day MA to suggest an emerging minor bullish trend change.

Investor Asset Flows

The upper panel of Chart 2 below also plots EEM daily, since October.  The lower panel plots the corresponding daily total net assets invested in EEM along with their 21-day moving average, which identifies a Tactical trend of either expansion or contraction

Chart 2

The green highlights in the lower panel point out what appears to be an emerging Feb 8th trend of monthly asset expansionExpanding investor assets are the fuel that drives a price trend.  As long as this trend continues, so should recent strength in EEM.

Table 1 below shows that, considering a 56.17 upside target and a protective stop placed below the 48.22 area, a long entry price of 49.70 would provide a 1:4.4 risk/reward ratio (risking $1.00 to make $4.40) with an initial risk of 3.0%.

Table 1


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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.