Ari Wald of Oppenheimer’s “chart of the week, month, and potentially year” is the iShares MSCI Emerging Markets’ (EEM) reversal of a 10-year downtrend.
Wald says this recent breakout of the trend that goes back to its 2007 peak is not only significant for the future direction of EEM (which he thinks will go higher), but also for equities globally (see Chart 1). Specifically, he sees EEM’s reversal as the next step towards his bull case scenario in which global equities, both developed and emerging, join the US in a secular rise. Wald goes on to say that the chart also corroborates his view that the market cycle is in its early to middle stages, rather than late.
In terms of EEM’s relative performance to other equities, Wald says that the first higher high relative to the MSCI All World Index since 2010 suggests its continued outperformance. In particular, he thinks South Korea and Taiwan look the most attractive markets given they have already cleared resistance at their 2014 peaks (see Chart 2).