Is this a Double Top in Turkey?

Let's take a good look at Turkey today. This is a weekly logarithmic bar chart of the iShares MSCI Turkey ETF $TUR. You can see that prices peaked in the highs 70s in 2010 and again last year. We are now dangerously testing the support levels from late 2011.

This level also represents the 61.8% Fibonacci retracement from the entire 2008-2010 330% rally. So this level better hold, or it can be a problem. I don't see much support below the 2011 lows.

I'm not sure how much a Turkey breakdown (or rally for that matter) will affect US stocks. I get mixed signals when I run the correlation studies. Over the last month, Turkey and the S&P500 have a high positive correlation +0.74, but just as high of a negative correlation over the last quarter -0.73. Same goes for the last 12 months - very high negative correlation -0.72. But it's tough to imagine emerging markets and Equities as an asset class holding up if these guys keep crashing. I mean, Turkey has been in crash mode all year, and US stocks have been getting hit hard right?

Money continues to flow into Treasury Bonds as US interest rates keep dropping. They want nothing to do with equities. Amazing what a month can do in this market. It seems like just yesterday that everyone loved stocks and it was bonds that were hated. Never a dull moment with Mr. Market.

So we'll be watching this 2011 support as the big one. If we start breaking, equities are in trouble. Those of you looking to bottom fish $TUR for a trade, I think you will get the monster rally. When this thing turns it can potentially make your quarter. I'm keeping an open mind, but I only want to be long if we can stay above 2011 lows. As of right now, we haven't see evidence of that yet. But a trade on the long side could be coming soon.

I think a nice heads up of a squeeze in Turkey would be a rally back above 0.25 in relative strength. This is a chart of Turkey relative to the S&P500. If this turns out to be a false break, we could get that squeeze higher.

With that said, I want nothing to do with this ETF as long as we're below 2011 lows in price under $40. This will continue to develop and volatility seems like it's here to stay in $TUR. And with that volatility comes opportunity. Stay tuned...