ACWI and EEM

Since the election in the first week of November, U.S. equities had a strong performance. Though, strong rally in U.S. equities has been limited to very few sectors. ACWI ETF (underlying instrument: MSCI All Countries World index that tracks the performance of the 23 developed and 23 emerging markets) has been in a correction since the beginning of September. EEM ETF (underlying instrument: MSCI Emerging Markets index) broke down two major support levels, a year-long upward trend line and a horizontal support at 35.88 levels.

There is a possibility of the latest downward trend channel to form a flag continuation and breakout higher without breaching the year-long uptrend on the ACWI ETF. However, failure to do so can result in a similar price action that we have seen on the EEM; a breakdown of the year-long trend line support. Both charts suggest that equity market strength is limited to U.S. equities and in the U.S. markets it is limited to very few sectors.