Emerging market equities are hovering above key support and threatening to turn significantly lower, according to David Sneddon and James Gilbert at Credit Suisse in London.
Sneddon and Gilbert say the rise of the US dollar is putting the MSCI Emerging Markets Index under pressure, such that it is currently testing a key level at around 1140. This level comes from a cluster of key supports comprising i) the pivotal low from February, ii) the 200-day moving average, iii) the 23.6% Fibonacci retracement of the 2016 to 2018 bull trend, and iv) a potential medium-term uptrend (see Chart).
Failure to hold 1.1140/23 would see a top complete, which Sneddon and Gilbert would see as warning of a more significant turn lower with support then seen at 1098 and then the 38.2% retracement at 1052. They point out that weekly RSI momentum is already trending lower.