From Cabot China & Emerging Markets Report
While China continues to wrangle with Japan over territorial claims in the East China Sea (and South Korea has stepped into the ring), there’s not much substantive news out of China since the Second Plenum meeting a few weeks ago. Economic news has been generally good, but not good enough to kickstart a broad rally.
The major U.S. indexes have all taken a hit this week, as good economic news in the U.S. has raised the odds that the U.S. Federal Reserve Board will begin the long-anticipated (and much-feared) program of tapering its bond-buying program soon. Markets sometimes react paradoxically to good news, and, having discounted the probability of tapering, it may be that the reality of tapering itself will signal a little bit of optimism. Nobody knows; predictions are all over the map.
The iShares MSCI Emerging Markets ETF (EEM) remains under pressure, but still within range of its 25- and 50-day moving averages. The critical technical point for the ETF’s price will be 40.5, which was support in late September and again in mid- November. The last time EEM closed below that level was on September 6, and its movement since then can be interpreted as either a long sideways move (14 weeks) with resistance at 43–43.5, or as a correction from its October 22 high. The charts of all-China indexes are a little tighter, but basically parallel those of broad emerging-markets measures like EEM.
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