If Santa is coming for the emerging markets, he had better load up on bullish sentiment, because the trend is starting to look like it did over the summer -- and August was anything but a "Santa rally."
Take a fund like EEM ( quote ), which is now up only seven days over the last month and has lost an aggregate 8% over that time frame.
What is frustrating about this particular swing is that we were lurching below the 50-day trend line a month ago as EEM headed to a recent low around $36, so the subsequent pop above the line was short-lived.
By comparison, the October rally held the 50-day line for over a month before flipping that near-term support back into resistance.
At this point, the 200-day line is still in range of a full-force Santa rally, up only 16% at $43.56.
But to hit that line -- much less reconquer the 50-day trend at $39.19 -- we are going to need a real recovery in emerging currencies.
That means a reversal of the recent "risk off" frenzy in which the euro and everything behind it on the conventional risk scale get sold off, forcing many traders to liquidate emerging stocks to raise cash.
The yuan is not the euro. The Australian dollar is not the euro. And the global economy does not look as bad as the chart may imply.