What I'm looking at - emerging markets, % of stocks in a correction, copper, oil producers
Here's what I'm looking at:
Emerging markets
In a continuation from yesterday, emerging markets have sold off sharply in recent weeks (notwithstanding yesterday's rally). Here's an aggregate chart which combines the "% of members below their lower Bollinger Bands", the "% of members with RSI < 30", and the "% of members at new 52 week lows":
When emerging market equities sold off sharply in the past (based on this aggregate breadth indicator), the MSCI Emerging Markets Index often rebounded sharply over the next 3-6 months. The biggest failure occurred in September 2008 as the global economy and markets fell off a cliff. It's hard to argue that today is similar to September 2008:
Correction
The % of S&P 500 stocks in a correction (more than 10% below 52 week highs) fell over the past few months to the lowest level since early-2018 as the stock market rallied. My various studies demonstrated that when this happened in the past, the S&P's returns over the next 6-12 months were mostly bearish since this typically happened after a major correction or a bear market:
But as the S&P made a recent pullback, the % of stocks in a correction jumped more than 15%. When this figure hit a 400 day low and then jumped more than 15% over the next 2 weeks, the S&P typically rallied over the next month. In a bull market this is typical when the market experiences a period of strong momentum and then makes a quick pullback.
Copper
The recent stock market selloff crushed many commodities, including copper. But after falling for a record # of days in a row, copper finally rallied yesterday:
When copper rallied for the first time in at least 7 days, its performance over the next month was heavily split. From 2002-present, this usually led to gains vs. pre-2002, when this almost always led to more losses:
Oil producers
And finally, oil producers have been crushed along with the recent selloff in oil, pushing XOP Optix's 10 dma to one of the lowest levels in history. The few other times this happened, XOP rallied over the next few weeks. Particularly impressive was that XOP did so even when it was in a downtrend (i.e. a bear market). In those cases, XOP made tradable bounces before falling even more: