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Emerging Currencies At Breakout, Could Hugely Impact Emerging Stocks

Emerging markets are in great shape. InvestingHaven’s research team has written about emerging markets since early last year, and the performance since then is stellar, especially in our favorite market India. The million dollar question is where emerging markets go from here?

Interestingly, financial mainstream media remains sceptical. They are on every new trend, it is so typical and a trap for most investors. Today’s emerging markets news by Reuters is a typical case: the undertone remains sceptical, clearly. It is worse with this Barron’s article: this analyst remains not convinced because of some debt related issues. As if the U.S. stocks markets were not rising given the debt overload.

The track record of the analyst is as bad as it can be: right at the bottom of last year, in January, the same analyst predicted that (global and emerging) stock markets would continue to fall, and India would not be an exception. Guess what, India has risen almost 40 percent since then. This is what we wrote in February 2016, two weeks after the market call of the aforementioned call of Barron’s: India Stock Market At An Inflection Point. Is This A Lifetime Buying Opportunity (February 2016). Investing Haven has continued to call for a very bullish Indian stock market, so it is fair to say that market calls of Investing Haven outperform the ones on most financial media.

As always, it is an absolute minority of smart investors that catch a trend early on. This Bloomberg article learns that a small number of hedge funds have been successful, in particular the ones invested in emerging markets.

With that, it is no surprise that an increasing number of investors become bullish on emerging markets. That is how it always goes: once prices have risen substantially, the majority joins the party for the minority of the profits.

Investing Haven readers are alerted as new trends arise, with a success factor of 80 percent of trends. Needless to say, nobody hits 100 percent winners, nor do we. But a free blog hitting so many successes is unusual, and we proud of it.

5 Emerging Markets To Buy In 2017 And 2018 (January 2017)

Is It Time To Buy India Or Other Emerging Markets? (March 2016)

Will Emerging Markets Become The Investment Of 2016 And 2017? (April 2016)

Emerging currencies to determine emerging stocks next trend?

It is a fact that emerging markets arrived at a secular resistance point. If they go higher from here, it would mark a huge breakout. How to know that this breakout materializes? And is there a leading indicator?

The first question is an easy one. As said in the past, EEM ETF has a secular breakout in the 43 to 45 point area. A continuation above 43 points increases the likelihood of a secular breakout.

The second question is surprisingly simple to answer as well: watch emerging market currencies. The CEW index, visible on the chart (black line) shows the correlation with the emerging stocks (light grey line). Both assets arrived at a resistance level. If both go higher from here, it is a confirmed breakout. Emerging currencies will certainly act as a leading indicator.

Smart investors watch both assets for the ultimate breakout confirmation.

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  • TAJ

    Great stuff. Appreciate your analysis. Thanks.

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