Emerging Market ETF Has Seen Better Times

Emerging markets have had a tough start to the new year, and the MSCI Emerging Markets Index is currently down 6 days in a row for a loss of 5.04% (EEM).

We went back to 1988 (the furthest price history we have) to see how the Index has reacted in the days following down streaks like the one we're currently seeing. A six-day losing streak has occurred 39 times since 1988, and the Index has reversed and gone up on the 7th day 14 times (36%). The average percent change on the 7th day is -0.24%, while the average one-week and one-month change following a six-day losing streak is -0.001% and -0.01% respectively.

The current data suggests the Index will not see a positive bounce in the near future.

click to enlarge

Comments

[S A:]

Still need to see how it closes but so far EEM is up more than 2% today...

SA.

2007 Jan 11 11:49 AM

[Susan:]

These kind of predictions rarely pan out. Globalization did not exist in 1988. Brazil and other emerging economies were big debtor nations, now many are running surpluses. China's growth and growing middle-income class is driving significant growth in raw material exporting countries.

The big drop was an overreaction to Chavez Venezuela's nationalization plans.

My prediction: EEM will break new highs this year, several times.

2007 Jan 11 09:15 PM

[Tom B:]

You are probably right about Chavez.

I personally steer clear of China, because who knows if they follow generally accepted accounting standards? I have more faith in India, as a democracy and a former British colony. I would diversify in South America, nation-wise, because of similar concerns.

2007 Jan 12 09:31 AM