This Great Graphic, from Bloomberg, depicts the performance of three global equity benchmarks indexed to the start of the year. 

Click on picture to enlarge

The green line is MSCI Emerging Market equity index.  It had been doing well until early September.  It has been crushed since.  

The case for emerging markets was predicated on a certain investment climate which does not exist any more. This included a weak dollar, prospects of low or lower US short-term rates, rising commodity prices and a strong(er) China.   

That said, the MSCI EM equity index is closing the week with largest three-day advance in over a year; recouping about a third of the 11% loss between November 27 and December 17. While there will not be full participation in the markets for the next couple of weeks, technically, the MSCI EM index is poised to move higher. In terms of magnitude, there is scope for 2.0-2.5%. 

The white line is the MSCI World Index, which is its developed markets index. It is about 3% higher on the year compared with a loss of about 6% for the emerging market index. It has a roughly 200 point range between 1150 and 1750 a couple times this year.  

It fell to the lower end of range in early February and too it through early July to peak just above 1765. It sold off to 1570 by mid-October and proceeded to rally back to 1750 at the end of November. The recent swoon took it to 1650. Th recovery over the past three sessions has carried it to 1715. The 61.8% Fibonacci retracement is near 1710. Technically, the conditions for a re-test on the 1750 area are in place. 

The yellow line is the S&P 500.  It has clearly outperformed the other here this year.  It was touch and go for the first three quarters, but the September through mid-October swoon was not as significant, and the rebound since has been more impressive. The S&P 500 gapped higher yesterday (December 18), following the strong close the previous day after the FOMC meeting, and seemingly aided by the Swiss National Bank's move to negative interest rates.  

That gap is 2016.75 to 2018.98.  We do not look for this gap to be filled in the near-term.  Rather the gap signals the end to the corrective losses and the resumption of the bull advance that will likely carry to new highs.