As noted here on Monday, it appears copper prices are about to take another significant leg down. The price of copper has now decisively broken through the rising support line in what appears to be a continuation of the longer-term downtrend that started back in 2011. The metal price has yet to take out the low of 2.95 achieved in March, but based on recent history that day is not far off.
Assuming copper prices do make a new low then, what would that mean for EM stocks? Based on the last two charts below depicting copper prices on the left axis and the MSCI EM price index on the right axis, we should expect another leg down in copper to coincide with more weakness in EM stocks. The third chart offers a shorter-term view of the relationship and from this perspective it appears that EM stocks have gotten ahead of themselves.