Emerging markets are very close to a new secular bull market. They are just 1-percent below a mega breakout level on their chart. If emerging markets go just a little bit higher, it would be big news. It would surprise us if only a minority of analysts and sites would notice this though.
Right now, a minority of writers have spotted the opportunity we've started talking about a year ago. MarketWatch, for instance, came out last week with this bull market call for emerging markets.
CityWire rightfully pointed out that a raging bull market in emerging markets is justified:
Evan-Cook sees ‘valuation opportunities’ in emerging markets, with India currently ‘a lot more exciting’ than China. In India ‘the chaos breeds opportunities’, he said. ‘People were very excited about emerging markets going into 2007, due to the growth of the middle class,’ Evan-Cook pointed out. ‘That went too far, there was over-investment, the excitement burst and companies struggled to do well. But now those advantages of 10 years ago are coming through.’
Our research team is pleased to have called for another very sharp market call. Last year, the analysts published an emerging markets forecast for 2017 which determined the emerging markets / U.S. dollar correlation as an important indicator for the future of emerging stock markets. This is a quote from that article.
If the dollar weakens from here, and only rises moderately, we see EMM rise to its resistance line at 43 points. That is our bullish forecast. Chances are high that EMM could break out. Such an event, given its long sideways trading, would be significant. Emerging markets will attract a lot of interest from the investment community, which will feed the bullishness. The line in the sand is 103 points in the U.S. dollar index.
That quote was published in November of last year. Meantime, the dollar has remained flat, and emerging markets have gone sharply higher. They are not inches away from a mega breakout, which would suggest a new long term bull market is starting.
That is why, more recently, we suggested that emerging markets will be strongly bullish in 2018.
The emerging markets chart shows that emerging markets (via iShares MSCI Emerging Markets (NYSE:EEM)) have created an unusually long consolidation period of 9 years. From a price analysis point of view this is very, very significant. Smart investors will notice the breakout, and they will accumulate significant levels of investments, which will drive prices higher, and create momentum longer term.
That is how a secular bull market works. Investors want to get in early, and follow the smart money.
