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Editor's Note: Below is a brief excerpt from this week's Market Edges, our weekly newsletter of big picture Macro themes plus investing implications. Click here to learn more about Market Edges.

Emerging Markets: Bear Market Bounce? Or New "Globally Synchronized Recovery"? - 06.18.2018 EM plugged toilet cartoon

Is this the beginning of the next “globally synchronized recovery” or just a bear market bounce in Emerging Markets?

Another day, another collection of slowing economic data out of Emerging Markets:

  • Argentina just printed a down -4.2% y/y GDP report
  • Argentina’s Shopping Center Sales (-1110bps to -3.76% YoY) and
  • Argentina's Supermarket Sales (-816bps to -3.65%) data for the month of July

We’ve discussed the risk to EM economic development born out of a reversal in global capital flows and beleaguered economies like Argentina ad nauseum, so really not much to add here other than reiterating the SELL call we authored on Emerging Markets back in January. 

Bear markets bounce. Last week, Chinese Stocks and Copper were up +5% and +9% . Emerging Markets were up almost +4%.

In other words, there are plenty of short-selling opportunities at these lower-highs. "I've been waiting and watching for an Emerging Markets (EEM) immediate-term TRADE #overbought signal and last week we got it," CEO Keith McCullough wrote last week. 

"We were the only independent research firm to make the SELL Emerging Markets call back in JAN 2018. While there seem to be plenty of experts who can tell you why EM "should be going up because its cheap", we'll stay with the measuring and mapping process that had us move to the bear side to begin with."

A move to a higher-high in the U.S. Dollar and lower-lows across EM financial markets over the next few months remains our base-case scenario.

Emerging Markets: Bear Market Bounce? Or New "Globally Synchronized Recovery"? - market edges