The S&P 500 is ready to begin a period of strong outperformance relative to emerging market equities, according to Sejul Gokal, Chief Technical Strategist at GO-TechniKAL Insight.
Gokal points to two technical factors as evidence for forthcoming S&P leadership: 1) a rock-solid SPX hitting another all-time high, and 2) the appearance of a double-top pattern in the MSCI Emerging Markets index.
He also observes that the ratio is respecting the 200-day exponential moving average (EMA), a pivotal support line that has underpinned SPX outperformance (see Chart). The 200-day EMA has now caught-up with price-action and more importantly has positioned itself below the range low, adding further strength to the base building process. Gokal’s expectation is that the SPX will lift-off to new relative highs and the ratio will target the channel top (> 3.0).