Sentiment among global fund managers is still frighteningly high where emerging markets are concerned. There is simply not enough fear out there to justify these valuations. Merrill Lynch's fund manager survey determined that as of last week, investors were still 29% overweight on emerging markets equities -- compared to a 22% overweight the week before. In other words, the allocation to emerging markets is still climbing as a percentage of global capital. While this is nothing compared to the 58% overweight we saw at the peak in November, it is still a little scary after the way EEM ( quote ) has underperformed EFA ( quote ) and SPY ( quote ) in the last three weeks. It is also a little scary that both Russia and Brazil are still overweights despite their terrible performance last month. Russia and its associated funds like RSX ( quote ) are apparently still among the most crowded trades out there, with a 53% overweight. Brazil and EWZ ( quote ) are a little less crowded, but are still 21% overweight. What happens when the United States gets a 500,000 print on jobless claims or a 0.4% print on core CPI? Not sure either will happen, but the positioning here definitely says emerging markets have room to fall -- they just have not seen the right catalyst yet. So be careful out there, and watch for the right opportunities!