“Our question is what professional investor is holding the mean reversion trade of long Emerging Market relative to short Developed Markets if this is all true? The answeris NO ONE,” said Azous.

Along those lines, a compelling scenario is developing, that being increased relative strength by the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) against the S&P 500 as detailed in the chart below. Brazil is the fourth-largest country allocation in EEM at a weigh of 10.6%, according to iShares data.

EEM/S&P 500 Relative Strength

Data Courtesy: Bloomberg

Chart Courtesy: Rareview Macro

Tom Lydon’s clients own shares of EEM.