Emerging markets are nearing a major inflection point. In other words, it is decision time in 2016.
The long term chart of emerging markets has basically two secular trend channels. One is a rising channel which started a couple of decades ago. The other one is a falling channel which started in 2011 basically.
As the chart shows, the support line of both channels are about to intersect. That type of ‘event’ always has a secular importance. An example of that is the crossing of the resistance lines of both channels in 2014 (see red circle on the chart), which was a failure to break higher, confirming a continuation of the downtrend.
We expect both support lines to intersect only late in 2016. That ‘event’ would have a major implication. Meantime, emerging markets are near secular support, so a significant bounce in the coming weeks and months is in the cards. If that bounce were not to happen, it would imply a major breakdown is in the making.
2016 will be a very important year for emerging markets, without any doubt.