Not only did the emerging markets come to life this week, but it took one day for everyone to notice them.
With that in mind, I drew in a second line for the iShares MSCI Emerging Markets ETF (EEM) chart, following up on the full discussion is in Wednesday's missive.
The black line was crossed rather handily and now the blue line comes into play. But let me remind you that there remains resistance all the way up.
This of course arrived in conjunction with a big decline the dollar. Now here's a lesson in patience: Back in late November, the Daily Sentiment Index (DSI) for the Dollar Index got to 88. At the time I cautioned, based on that reading the time for bullishness on the dollar was behind us. But look at that -- it took six weeks for it to collapse. Sure, it didn't rally again after that, but it chopped for six weeks and then, down it went. The current DSI is at 60 now, so despite sitting at that uptrend line, it tells us very little about a bounce.
Depending on how specifically I measure the top the move in the dollar measures to 94-94.50. The blue line is the top of that support. Should the buck break the black line, I expect that the support in the 94 to 94.50 area is what's next and provides a place for a bounce.
Some of you might recall my write up recently where I noted how the chart of the dollar looked so similar to that of the Philadelphia Semiconductor Sector index, or SOX. For now, the SOX has held stead-fast, much the same way 95.50 held for the buck all this time. It remains to be seen if the SOX will follow the dollar, but if the SOX breaks 3,700, I figure I won't be the only one making that comparison.
Also, the DSI remains in neutral ground for the S&P and Nasdaq. But recall a week ago the DSI for the VIX got to 16, just as the market reached its overbought reading and I said it was time for a bout of volatility? Well, we got some and it ended on Monday. But I have also said I expect this year's market, at least for now, to bring us volatility and that the market would not be a place of comfort for anyone -- longs or shorts.
With that in mind, let me report the DSI for the VIX is back to 20. That means we're back on VIX watch again. Once it falls into the teens, it's time to get on our toes once again.
Jim Cramer once said the market is not a sofa, it is not a place to get comfortable. I think that's a good description of the market we're in right now.
