There are a lot of debates whether the current stock market is the longest one in history or not. I am in the group of people who thinks that’s not the case. I think this market had a lot of corrections since the bottom in 2009 or since 2013 which was the start of a new secular bull market in my opinion.
Even if you focus only on the US stocks one could argue that the market was in a correction during the 2015-16 period. But for the most of the world markets did not even have a chance to take its former all time highs. Regardless of your or my opinions we have to respect what the market is doing and act accordingly.
And the fact is that most stock markets are under-performing the US market. A nice example of a lagging market as a class are merging markets or $EEM ETF.
Last year $EEM ETF broke out through a falling trend line. It indicated that the rally which started in 2015 could continue higher and take us towards new all time highs. Since early this year it was correcting in a very orderly fashion.
It corrected to its breakout point that occurred last year at $42 per share. This is an important level to watch. It could bounce from around here and start making another leg higher. But should it lose this support, then it could easily fall for another 10-15% or so.
I think that Alibaba could give us some clues. It broke an important support at $165 per share which is indicating a rounding top has been formed and is now targeting to fill the gap at $125 at least.
Should $BABA stay below $165 I’d be very cautious at buying both, because $BABA is an important component of $EEM. But in case of a potential reversal, where $BABA would quickly get above $165 again, then this could be a potentially very bullish sign for both products.