Great Graphic: DM and EM Equities

This Great Graphic that was created on Bloomberg shows the relative performance of key equity indices so far this year.  

The yellow line is the MSCI emerging market equity index.  After chopping around in the first part of the year, MXEF rallied strongly from the middle of March through the end of April. However,  has been sold aggressively. It is off for the 12th consecutive session today and is down 16 of the past 17 sessions.  It is approaching a uptrend line drawn off the December and March lows.  It comes in around 962-964 this week.  The 968 area is the 61.8% retracement of that rally from December's lows, which were set near 906. 

The white line in the MSCI World Index (MXWO).  It is their development markets index (free-float weighted).  It outperformed in the first part of the year, lifted by Europe and Japan.   The DAX which gained more than a quarter has now given back half.  The FTSE has given back a third of it gains.  

Japanese stocks had fared better.  After peaking at multi-year highs in late May, the Nikkei drifted lower before gapping lower today and settling on its lows.   This is a potentially bearish sign, and all the more so if the gap is not closed in the near-term.  It would more likely be a break away gap that signals a trend reversal than a measuring gap.  The measuring gap projects to near today's lows.  

US shares have also dragged down the MSCI World Index.  The S&P 500 has generally meandered this year while edging to new record highs.  With yesterday's loss, the S&P 500 is up a little less than 1% year-to-date, while the Dow Jones Industrials have turned slightly negative.  The S&P 500 recorded its high for the year (record) on May 20.  It has since fallen by 2.6%.   It may gap lower today, but our initial thought is that it would be a normal gap, meaning that it gets closed quickly.  

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