It's Emerging That EMs Might Be Ready For A Pause

"There’s so much positive momentum in risk assets, it’s difficult to see what could stand in the way of the emerging-market rally, at least in the coming days." Recent article in The Bangkok Post about the rallies in emerging markets debt and equity securities.

Well, there is actually something that could stand in the way: technical and momentum indicators.

Here at Excalibur Pro, we look at multiple indicators to get a sense of how strong are the signals that are being thrown off by momentum and technical indicators. And what we are seeing is suggesting there may be a pause in the emerging markets rally soon. We are using as our proxy the MSCI Emerging Markets ETF and what we are seeing:

• The price of the ETF closed today above its 50-day, 100-day and 200-day moving averages (it edged above all three late last week).

• The RSI today was 69.9. Remember, a reading of 70 is generally considered an overbought situation.

• The MACD line remains above the signal line, which indicates a "buy" signal. However, the spread between the two (the histogram) has been narrowing over the past few sessions.

• The Markov Process, which had been sending some strong bullish signals recently, has begun to weaken.

Stay tuned.