While nothing works like that in trading, and while we were wrong on the overall direction of this spread for a good part of 2H’13, we are seeing some price action in this trade.
With markets under pressure and EM’s propensity to underperform during periods of downdraft for global markets, we are ready to adhere to some key technical levels on our MSCI Emerging Market (EEM) vs S&P 500 (SPY) spread trade.
If you have been riding the Yandex (YNDX, quote) roll-coaster over the last few weeks with highs and lows inspired by the Kremlin and earnings we remain committed to a valuation and fundamental call that takes the stock to $35.00 by mid-summer on growth in mobile ad spend and retail exposure through search.
Real money is made in Emerging Markets when you take risk: Yandex (YNDX, quote) has rallied 25% from intraday lows of last week when Putin attacked the “western” nature and linkages of the internet and technology players in Russia.
Playing in Russia this AM with the news that Putin is commenting that the elections in Ukraine are a move in the right direction.
A look at the chart of the DXY shows the Dollar basket kissing the lows of Feb ’13 and testing all the way back to levels that were established in early 2012.
While we see the Sensex (quote) struggle to break through 23K since the beginning of the election cycle (see our note on taking profits in India), we would endorse longer term allocations to the highest growth major market in Asia.
US Treasuries, as illustrated by the 10yr bond, have been range bound for a year as we hem and haw over interest rates and parse through Fed statements.