For this week's edition of the SIA Equity Leaders Weekly, we are going to update and re-examine the main components of the number two ranked asset class within the SIA Asset Class Rankings, International Equity.
Back in early March of this year we had observed that ever since International Equity moved up in ranking just below US Equity, both of the asset class' components, the international developed and the international emerging, had been showing considerable strength, and that strength still continues to this day. In the mid-May edition of the ELW we then looked at a comparison chart between the two in order to determine who was the relative strength winner. As noted then, after over a year with a rather large relative outperformance by the emerging markets sector, we were and continue to be in a period of consolidation where there is no clear over-all winner; for the past one year both sides are contributing nearly equal to the overall asset classes strength. From a longer-term perspective, the emerging markets sector remains in a comparative up-trend; time will tell if that trend continues, but for now we will enjoy the overall strength seen in the international markets. Let's now take a closer look at both the iShares MSCI EAFE (EFA) & Emerging Markets (EEM) ETFs.
iShares MSCI EAFE ETF (EFA)
The iShares MSCI EAFE ETF (EFA) tracks a broad range of companies (900+) in Europe, Australia, Asia, and the Far East. The exposure to large and mid-capitalization equities from 21 developed markets outside North America give investors an easy way to diversify internationally. Since last looking at the March 7th, 2017 chart, the strength continued through strong resistance at $65 and currently sits at new all time highs.
As we can see in the chart, EFA has been on an upwards trend since mid-2009; for the past one-year the shares are up over 20%. Over this time, there have been some large pullbacks, periods of consolidation, and the recent rally taking place looks to possibly test new resistance at the $70, $75, and $80 levels.
To the downside, support can be found around $55, lower at $51-52, and much further below this at around $40. With an increasingly strong SMAX of 9, EFA is showing near-term strength against all of the asset classes. For those looking to dig deeper to see where specific strength is coming from within the Developed Markets, we recommend checking out the "SIA International Equity Developed Markets ETF Report" to see which specific Developing nations are providing the best relative strength.
iShares MSCI Emerging Markets ETF (EEM)
The iShares MSCI Emerging Markets ETF (EEM) follows 800+ large and mid-capitalization stocks from 21 Emerging market country indexes; this popular ETF gives investors exposure to countries such as China, Korea, Taiwan, India, Brazil, South Africa, and Russia.
Unlike the above chart, the trend of this ETF since its rebound in 2009 ran out of momentum in mid-2011 and formed a consolidation pattern which 7 years later is still in place. Over the past year and a half though, the resurgence we described in early March has continued and for the past year the ETF is up over 23%. Further strength through strong resistance at all-time highs of $45 could open the doors for continued movement to the $50 mark.
To the downside, support levels can be found around the $40, $35, and $30 levels. With a very strong SMAX of 10, EEM is showing near-term strength against all of the asset classes. For those looking for ideas within the Emerging Markets to see where this strength is coming from, we recommend checking out the "SIA International Equity Emerging Markets ETF Report" to see which specific Emerging nations are providing the best relative strength and upside going forward.
For a more in-depth analysis on the relative strength of the equity markets, bonds, commodities, currencies, etc. or for more information on SIACharts.com, you can contact our sales and customer support at 1-877-668-1332 or at siateam@siacharts.com.
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