Judging by the trend from 2014 onwards, XLE and EEM drop first. Then the broad market drops. QQQ drops last. VXX is starting to flatten out with F1-F2 contango under 10%. I've seen that the market is very vulnerable when VXX makes lows with contango under 10%. I think the best way to speculate on this developing situation is to continue to be long QQQ while being short a combination of XLE and EEM. EEM is dependent on Chinese money, and I believe Chinese credit starts off the year strong as a bull because of the new year's credit quotas for banks. Many articles have been written about the amount of debt issued this year in China. EEM had bearish 4th quarters in 2014 and 2015. A lot of the credit growth necessary to blow the emerging markets bubble may have happened already.
XLE seems to have broken down already, but EEM in particular looks like it is ready to get rocked.
Edited by Charvo, 27 September 2016 - 10:24 PM.