Emerging Markets: Another Round or No Mas

We sold a quick YINN (triple-levered long China country ETF) trade into strength yesterday inside the service after writing a blog post last Friday about the prospects for emerging markets to generally stage a relief rally after being pummeled this spring and summer. 

Still, when a corrective chart becomes quickly overbought, as FXI (YINN is basically triple long this chart) did, for example, longs ought to stay disciplined and are typically better off taking profits and seeking to reinitiate another long after the chart has set back up. 

On the FXI daily chart, updated below, we can see as much, as price punched up through the upper Bollinger Band (indicative of a short-term overbought condition), only to gap down today. As you can also see, FXI remains below declining major moving averages, which means longs are inherently counter-trend and demand extra scrutiny and trade management. 

Going forward, in order to put a YINN-type of trade back on, we want to see the 20-day moving average  (orange line) serve as support into this pullback in order to serve as tangible evidence of a higher low by price. Otherwise, we would be buying into a potential rollover to fresh lows of a still-corrective chart, which would likely blow longs out of the water quickly. 

That said, the reemergence of some materials and energy names this week is promising for emerging market bulls, especially regarding China and Brazil. 

But whether it is round two, or "No Mas," for emerging market bulls still hinges on whether these charts make higher lows after the latest bounce attempt.