By: Jeff Cooper
Hit and Run Morning Stock Report: January 9th, 2023
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Special Report, EEM: How To Read The Mind Of The Market
Emerging markets are showing superior relative strength versus the SPX and NAZ.
Let’s analyze where EEM is headed technically using my New Swing Method ( the 3 Period Charts) and my Square of 9 Wheel.
With the break out over the top rail of its declining trend channel, EEM is providing us with evidence that it is ready to rally further.
The initial thrust off the October low saw EEM turn its 3 Week Chart up, green arrow, (3 consecutive weekly higher highs…not necessarily 3 consecutive weekly CLOSING highs).
Immediately following the turn-up in its 3 Week Chart, EEM tailed off and pulled back turning its Weekly Swing Chart down on the week of 11/21/22.
Notably, EEM left an N R 7 Week on that turn down on the week of 11/21/22---the narrowest range in 7 weeks.
These contractions in volatility typically lead to expansions in volatility within the next 1 to 2 weeks.
In this instance, bullishly, EEM exploded the very next week.
This is bullish behavior and underscores the agenda for higher prices.
Following the test TOWARD the top rail of the declining trend channel (black channel), EEM consolidated.
Throughout this turn-up off the lows, EEM was talking bullishly-- if you know how to listen to Mr. Market.
1) The shallow pullback and NR 7 Week following the up thrust off the October lows for the move spoke bullishly.
2) The subsequent explosion higher following the N R 7 Week further validated the door was open for higher prices.
3) Then after fully testing the upper trend channel, EEM pulls back tracing out two consecutive lower weekly lows thereby putting it in the WEEKLY Plus One/Minus Two buy position, purple arrow.
Why? Because the 3 Week Chart was pointing up satisfying the Plus One part of my Swing Method.
The two consecutive lower weekly lows satisfied the Minus Two part of my Swing Method on the week of 12/19 (low 37.57).
4) The next week, the week of 12/26, Christmas week, was a throwaway week; however, the setup was buffed out a break out above the declining trend channel going into 2023. EEM exploded again on cue, running to its 50-week moving average, green ellipse.
From a wave structure point of view, EEM shows a very shallow Wave 2 pullback in tandem with the weekly Plus One/Minus Two buy setup.
That’s a further constructive factor.
Last week’s authoritative close above the declining trend channel is consistent with a
Wave 3 rally in progress.
Integrating the price action/structure with my Square of 9 Chart allows us to give a projection for the next upside target.
Measuring from the October 33.50 low gives 90 degrees higher at 39.50:
Given that EEM closed meaningfully above 39.50 (north of 40) on the Friday weekly closing basis last week,
It allows us not only to forecast a target another 90 degrees higher…or 180 degrees up from the 33.50 low, but also to project a time frame of when that target should be achieved.
Both these time and rally expectations/projections are noted to subscribers this morning on the Hit and Run Private Twitter Feed…as well as where an ideal entry sets up on a pullback.