EM has been Favorite Trade

EM relative to ES (futures pair) is breaking out above the bull flag formation and starting to see some real momentum that is likely to have some legs.The green line shown below is the 200dma (green is always the 200 day) and although it has not been perfect in the futures pair it has been very good in the ETFs.

The ETF pair of EEM vs SPY put in a double bottom in January and December of 2016 and after climbing above the 200dma in the pair in March, the 200 day held as support on several touches in April and early May (see green line below). Upside potential improves above the trend line shown here and there is plenty of room in the long term view as weekly EEM/SPY is above the cloud resistance which held since early 2011 (see chart two below).

EEM is also breaking out above the long term trend line from the 2007 top that has worked as key resistance in recent years. A weaker US$ would also help add some strength to Emerging Markets (see bottom chart).

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