EEM: 5 Wave Expanding Pattern
First of all, let me say that I am not a follower of the Elliott Wave theory but I wanted to discuss a pattern which may or may not be of interest to you.
In the above chart of EEM, you'll notice a price formation that is called the 5 wave expanding pattern or a megaphone pattern. This pattern is made up of 5 waves. Wave 3 must move above wave 1, wave 4 must move below wave 2, and wave 5 must move above wave 3 in order for this pattern to be valid.
The megaphone pattern is a bearish pattern that is supposed to help spot a reversal of trend. In the above example, EEM is in the process of forming a top if you believe the pattern.
I don't usually trade this formation, but I have seen it work well over the years and at other times fail. Sounds like most price patterns huh?
Jim from the Kingsland Report commented today on the unusually high put volume he noticed for the June 105 puts.
I'm not saying EEM is a short, I'm not saying this is the end of the world for EEM, I don't even if I am going to short this market. I just wanted to alert those of you who do look at unusual put volume and the 5 wave expanding pattern that maybe there is a trade here on the short side.
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3 comments:
Definitely an interesting situation here and I have to give credit to reading Nouriel Roubini's blog on the rgemonitor website. It makes perfect sense. Did you ever wonder when layoffs in the home building industry were going to show up in the jobless claims ?? Those layoffs have probably had all the impact that they are going to make because most of the workers in the industry were not legal. The propensity for these workers to remit $$ (US $$) to their country of origin has been well documented and has helped emerging economies (Mexico and elsewhere in Latin America) maintain excellent current account balances. Evidently, this is coming to an abrupt slowdown. Nouriel points to the problem spreading to Europe and Northern Africa. Dave
I have to add that I did not mean to say that everyone who remits money to their country of origin is an illegal worker.
The dollar is seemingly ready to go on a bull run.
Thanks for the comments Daveo
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