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Will Emerging Markets Tank If 3-Year Support Breaks?

Are the emerging markets about to “submerge” and head a good deal lower? What they do at (3) will go a long way in answering that question.

The emerging-market ETF (NYSE:EEM) has been lagging the broad market for the past 15 months. It recently hit its 50% retracement level of the last year’s highs and lows and falling resistance at (2). That weakness has EEM trading below its 200-MA line.

EEM has spent most of the past 3 years inside of rising channel (1), which reflects that this trend remains up. The recent weakness has it testing the bottom of its rising channel at (3), which becomes an important test of support.

If that support fails to hold at (3), look for the emerging markets ETF to attract selling pressure. The next important support test after that is the 2017 lows, which is around 5% below current prices.

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