“Following a five-wave pattern, we should see at least a three-wave pullback and following a finished corrective sequence – the 3-3-5 pattern – we should see a new impulse with the main trend, ideally into new lows,” according to TradingFloor.com. “Looking at the daily chart, we have two gaps in the most recent rise: the one at 34.60 from October 6 and one at 33.90 set through the weekend following October 2. These could work as magnets in case of a pullback and should be overcome if we are in for a new bear swing lower.”
Emerging market stocks and related exchange traded funds have strengthened on the prospects that the Federal Reserve would hold off on an interest rate hike and increased stimulus from China would stabilize growth, but the asset class may have a hard time sustaining the rally.
iShares MSCI Emerging Markets ETF
Tom Lydon’s clients own shares of EEM.