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E-mini index traders are often looking to expand their horizons beyond the standard US-based indexes. Over the last several years, the emerging market segment, which consists of developing countries, has captured the attention of many traders due to its natural non-correlation with US markets and constant bullish fundamental developments.
The MSCI Emerging Markets Index is the standard yardstick that is used to measure the performance of this segment. The index consists of over 800 primary companies in 25 emerging economies around the world. The following are the countries represented in the index:
As you can see, it’s a broad representation of the emerging worldwide marketplace.
In October, 2007 the CME launched an E-mini future which tracks the MSCI Emerging Market Index. Its ticker symbol is EMI and each contract is sized at $50.00 times the index, therefore each point is worth $50.00. Its contract months are two months in the March quarterly cycle and the tick size is $0.10 or $5.00. It’s traded on GLOBEX and basically trades around the clock except for a 4:30-5:00 p.m. CDT pause for maintenance.
Fundamentally, the emerging markets are exciting. Infrastructure build out, rising standard of living for the population, and often limited regulations combine to accelerate economic growth. Over the last three years, this index has been up over 27%, however it’s down a little over 10% so far this year.
Technically, the index has had a wide range of 111-167 over the last 52 weeks and has been down-trending since May 16th. It’s currently trading at 137.51 and there is support at 135. Strong support exists in the 125 range.
Technical traders may start buying around the 135 range, and then again in the 125 area. As you can see from the daily chart, price has broken out of the lower Bollinger Band. Note what has happened over the last year when this has occurred, there has been a reaction bounce back up.
It's important to keep in mind that whenever investing in emerging markets there can be more risks involved than when investing domestically. Political instability, currency breakdown, and other economic factors all add up to greater risk. The EMI is based on a well diversified, global portfolio of large companies within the emerging markets. This mitigates the risk to an extent, however every trader needs to be aware of the inherent risks of the emerging markets prior to buying the EMI minis or any security from or based on these markets.
I believe, however, that this is the perfect time for traders to take a look at the new emerging markets E-mini as a tool for portfolio diversification and potential profits.
David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.
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