This is a tough market for many investors. Sure, global economic conditions are signaling improvement, but it's hard to buy anything when markets are overbought, and when there is so much saber-rattling in the Middle East.
You could buy gold on its next pullback, but I've talked enough about that. So let's talk about something else.
Emerging markets (Brazil, India) and their currencies have been taking it on the chin since April. Now the downside move is over-extended. Let's take a look at a chart of the WisdomTree Dreyfus Emerging Currency Fund (CEW). The CEW includes eleven emerging market currencies.
As you can see, the CEW got very oversold in June, and is at even lower price levels now. However, RSI, which is a momentum indicator, is diverging a bit. It's a bullish divergence.
We saw the same thing back in 2011. That led to a pretty decent rally, one that retraced 61.8% of previous downside move -- a typical technical target.
So, if you were looking for a similar rally this time, we might see a 61.8% rally, which lines up nicely with the 200-day moving average.
That's not to say this MUST happen -- every sunken ship has a chart, right? The CEW could break down further. But if the same bots and funds are trading the market this year that played it back in 2011, their trading strategies may be the similar as well.
This trade appeals to me because I like to buy things when they're cheap. That's why I'm buying gold, silver and miners. They're still cheap even though they've rallied for a bit. I think they have a lot longer to go.
The CEW has average volume of 124,000, which is not great. Any position I'd put on in this would be small. Do your own due diligence for any trade -- you're in charge of your own investing destiny.