Markets have been dominated by crude’s collapse in 2015 and in the first two months of 2016. Stock markets have been beaten down with crude’s decline, with emerging markets having suffered most.
The first chart shows the correlation between crude’s collapse and the sell off in emerging markets. Watch how emerging markets recovered sharply in the first months of 2015 as crude bounced higher. Also, watch how both assets declined in the second half of 2015.
Now, crude oil could be setting up for a huge bounce. As the above chart shows in the lower pane, crude is about to test its declining trendline. A successful break would undoubtedly catapult emerging markets higher.
The daily chart of emerging markets confirms the moment of truth we observe on crude’s chart.
If both crude and emerging markets succeed their current test, we would expect to see fireworks especially in the short to medium term in emerging markets.
Leave A Comment