Emerging Markets may lead the way up.
Emerging markets they have been battered heavily in the last year.
(skip this if you don't want my fundamental take)
The Fed interest hikes have caused US Dollar Strength and a large amount of $ denominated EM debt is becoming unpayable. Along with the Trump Tariffs, this has caused much volatility overseas. The US is making a strong attempt to disrupt international markets and maintain dollar reserve status / supremacy. A strong dollar also helps with the USG running high budget deficit. However I believe it is a short-term gambit that will accelerate de-dollarization around the world. Indeed, even Europe is turning away from the USD, Oil (Iran) is being traded heavily off the dollar system. That said, in order to de-dollarize, one has to first sell or default on dollar based assets, causing dollar based deflation.
Very long term, I think the US Dollar is toast. But meanwhile, it is very strong and a strong deflationary wave is hitting the world.
I'm watching for signs of this deflation turning, I think a relief rally MAY be starting, especially after Powell's comments yesterday. By being above its 50ma, I believe EEM is a stronger chart than US Stocks (QQQ SPY etc). EEM may lead the way in a risk-on, bear market rally.
On the charts, there is a massive trendline resistance to face. It would be a breakout to buy. I do have a small EDC position already, bought two days ago, that's already positive. Hoping for a breakout, but also have break-even stops.
China (FXI) has a similar, very interesting chart setup.
(skip this if you don't want my fundamental take)
The Fed interest hikes have caused US Dollar Strength and a large amount of $ denominated EM debt is becoming unpayable. Along with the Trump Tariffs, this has caused much volatility overseas. The US is making a strong attempt to disrupt international markets and maintain dollar reserve status / supremacy. A strong dollar also helps with the USG running high budget deficit. However I believe it is a short-term gambit that will accelerate de-dollarization around the world. Indeed, even Europe is turning away from the USD, Oil (Iran) is being traded heavily off the dollar system. That said, in order to de-dollarize, one has to first sell or default on dollar based assets, causing dollar based deflation.
Very long term, I think the US Dollar is toast. But meanwhile, it is very strong and a strong deflationary wave is hitting the world.
I'm watching for signs of this deflation turning, I think a relief rally MAY be starting, especially after Powell's comments yesterday. By being above its 50ma, I believe EEM is a stronger chart than US Stocks (QQQ SPY etc). EEM may lead the way in a risk-on, bear market rally.
On the charts, there is a massive trendline resistance to face. It would be a breakout to buy. I do have a small EDC position already, bought two days ago, that's already positive. Hoping for a breakout, but also have break-even stops.
China (FXI) has a similar, very interesting chart setup.
Trade closed: stop reached:
Closed out on today's breakdown.
The global bear market is alive and well, and it's too dangerous to go long anything.
The global bear market is alive and well, and it's too dangerous to go long anything.
Note that at this point, EEM, FXI, CQQQ, are trading above their 50ma, while SPY and QQQ are trading below. Thus emerging markets / China are stronger. Thus long positions should be biased towards emerging markets and short positions to the US markets.
Note that SPY and QQQ were cleanly rejected at the 50ma and 200ma. It looks very bearish out there.