Could iShares MCSI Emerging Markets Fund Beat the Bear?

A couple of years ago, emerging markets nations in Latin America and Asia could do no wrong. That’s all changed. However, there may still be a great way to play emerging markets with a stellar ETF performer, says Jim Stanton in The Smart Profits Report.

Global inflation is now a major worry for investors. Many emerging markets nations were keeping a lid on inflation with fuel subsidies. Sky-high crude oil prices have put a stop to that. Now they are passing costs onto consumers.

And a slowdown in US and Europe could impact growth, according to the Bank for International Settlements [BIS] — the Switzerland-based central bank for central banks.

This year, emerging markets nations have had a 6.7% consensus growth forecast, not far below the average of 2003-2006 boom. “Nevertheless, the potential knock-on effects of financial market turmoil in the major centres increased the risk of a slowdown in (emerging markets),” said the BIS.

However, Jim Stanton says he has found one emerging-market fund that hasn’t broken down. It is at a very critical area that offers a couple of opportunities:

Over the past five years, one stellar ETF performer is the iShares MCSI Emerging Markets Fund (AMEX:EEM). Over that time, it’s surged more than 400%. Since May, however, it’s endured some selling pressure, along with the rest of the world’s indexes.

The fund’s major stock holdings come from assets in Brazil, China, India, South Africa, Russia, Mexico, Taiwan, and South Korea, which make up about 80% of the fund. So you can see that it’s well diversified. However, no more than 15% of its assets come from any one country.

The weekly chart below (click to enlarge) only accounts for the last two years, but as you can see, there is a clearly defined uptrend line off the June 2006 low, which it’s testing for the third time in 2008.

This means EEM is at a critical decision point.

The Bearish Angle: A weekly close below the trendline, which is $133, would be bearish, bring on more selling, and should see a continuation of the worldwide correction.

The Bullish Angle: There is resistance at the $140 level and if EEM can manage to stay above the trendline and then close above $140, it would provide a good,  low-risk buying opportunity. If this occurs, I would use a close below $133 as a stop.

Comments

[johnthebear]

You are giving very bad advice. The chart does not reflect the trend of the last 6 months, which is down.

You should ask investors to look at the charts of China (^hsi) (^ssec), FXI and India as well as the charts for Brazil, Mexico, Russia, etc. BEFORE THEY INVEST. The MARKETS ARE ALL trading below their 200 day moving average. China is trading below it's 52 week low. Only a fool would recommend buying at this time. Investors are finally realizing that if they believe the market will decline sharply after the Olympics this fall, why wait and be left holding the bag. They are selling now and there is nothing that can be done to stop the trend downward, just as their is no stopping the drop of the Dow Jones average until we have bounced along a bottom for a period of time.

[LoveShorting]

I agree with the idea that ETF's are the best way to play emerging markets but recommend DEM vs EEM ... change one letter ... get more $$$.