Any pullback at this juncture should help the EEM bounce, and it will probably stymie the recent outperformance in the Russell 2000, among other assets. If that is indeed the case, but you believe the dollar’s recent rally will reassert itself before long, an opportunity should emerge for investors to rebalance their portfolios.
With all the new developments out of emerging nations like Argentina, Turkey and Venezuela, there are plenty of reasons to be bearish on emerging markets as an asset class; a near-term bounce could provide an opportunity for investors to shift some money away from the asset class if in fact they are concerned.
If the EEM breaks down further, this won’t be a technically positive development, particularly if it breaks meaningfully below its February lows. Such a break could even confirm the trend has changed for this popular asset class.