The stock market is obviously extremely oversold from an intermediate term standpoint and I am guessing that today’s aftermarket pre-announcement of a poor quarter by Apple could plant the bottoming flag? They saved the 2018 performance of many a money manager by notifying the street today and not in December as the stock was down as much 8% in the aftermarket. Thank you Mr. Cook and co.

The asset class that could lead global stocks in the coming months is the Emerging Markets (off 27+% from Jan high) and there is some pretty good evidence to support this assertion. Chart below is pretty busy, but there are a lot of good things going on here. First it has gone sideways since its closing Oct low while the S&P 500 dropped another 9% (strong relative strength).  MACD has been rising since the low (positive divergence), and chances are the downtrend should be pierced soon potentially creating a rush to get in.

Also in EEM’s corner is the topping pattern in the US $. The world’s reserve currency has been on a tear since the spring, but has now formed a distinct and usually dependable weekly MACD negative divergence. EEM much prefers a falling dollar and it appears this is in the cards. The setup here might  last 2-4 months and EEM could significantly outperform domestic sector/indices during that period.

Luckily we sold EDC (3x EEM) today on a intraday negative divergence signal before the close. The Apple news should give us a re-entry point in the next couple of days. This also might be a good time to overweight Emerging Markets in your 401ks’s, IRA’s or other longer term portfolios.

Final Thought –
“My drug test came back negative, my dealer has some explaining to do” – Unknown 

More later,
Max Power                                             

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Disclaimer: Remember everything I said could be wrong, the market always has the last word.

 

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