Dan Nathan Bearish On iShares MSCI Emerging Markets Indx (ETF) (NYSEARCA:EEM)


iShares MSCI Emerging Markets Indx (ETF)(NYSEARCA:EEM) was a massive decliner during Friday’s trading session. The stock plunged by close to 2% on the back of the sharp sell off seen in the Chinese markets. The ETF collapsed below its 50 day moving average, which is a bearish signal. The momentum oscillators for the ETF have given a sell signal pointing towards the strong bearish momentum. Traders believe the stock could find support near levels of $33.49 in the near term. The relative strength index for the ETF has formed a lower high, which is considered to be a bearish signal.


Dan Nathan of CNBC Options Actionhas a bearish view on iShares MSCI Emerging Markets Indx (ETF) (NYSEARCA:EEM). He mentioned of an options strategy that he advised on November 6, 2015. After he advised a short position, the share price of EEM traded 5% lower and bounced back. In fact at one point the recommended trade was worth double and Nathan stated that it is always a rational decision to book some profits in such instances.

The view

Nathan considers that the emerging markets can suffer and move south on the chart if the Federal Reserve decides to increase interest rates. He said that if Federal Reserve doesn’t hike interest rates, it will be due to the weak global growth, which again will put pressure on iShares MSCI ETF.

The week ahead is going to be the most important time of the year. Rarelyit is seen there is such a major confluence of events during a short period that can have far-reaching consequences. Investors are preparing them for unpleasant surprises. Many of them have been discussed extensively. One major implication of the expected event is that most of the expected results have been discounted by the market.

The expectations

The market has been expecting next week’s events to be major but regardless of gyrations, the underlying basics divergence will continue to remain a potent force for all ETFs including iShares. The SDR decision is unstated to be principally a done deal. The basic is the weight the Yuan currency is given.

There are several essentials of the ECB’s policies and many times and repeatedly the market has underestimated Draghi. US jobs growth is questionable, but without a sharp weakness surprise, the Federal Reserve is all set to increase rates in the mid of December. OPEC faces restrictedalternatives to make room for Indonesia and Iran’s output.