If You Think U.S. Stocks Look Bad, This Is Much Worse

U.S. investors have had a tough week in the stock market.  
 
Stocks ended Tuesday down only about 4% from their highs of 2012 – which doesn’t sound like a big deal… But it’s a loss of 4% in just five days – which is a big deal…
 
As bad as it has been for U.S. stocks, emerging-market investors have fared worse. When the closing bell sounded on Tuesday, the MSCI Emerging Market Index was down 9%-plus from its early March peak. Take a look…  
 

 
This index tracks the performance of 22 emerging-market countries. It includes “popular” countries like Brazil, China, India, and Russia. It also includes lesser-known countries like Indonesia, Hungary, and Morocco.  
 #-ad_banner-#
So if misery truly loves company, U.S. investors can take comfort knowing there are plenty of other places around the globe that have taken a harder beating.
 
And it looks like it’s going to get worse.
 
The iShares MSCI Emerging Market Fund (EEM) broke below an important support line at $42.50. That area should now serve as resistance for any oversold bounce. In fact, aggressive investors could look to sell shares of EEM short as they approach the $42.50 level.
 
The next support is down around $40. If that fails to hold, $37 per share comes into play. That sort of action would eliminate all of this year’s gains… and even put emerging-market investors underwater for 2012.
 
Emerging markets are notoriously volatile. They experience dramatic “boom and bust” cycles. We’ve just seen a huge 33% boom off the October lows. Now it looks like it’s time for a bust.