EEM and dollar mostly go different directions, meaning a stronger dollar coincides with a weaker EEM (and vice versa). So where dollar is heading from this point will have impact on EEM.
Awesome Chart!! Raoul Pal talks about this quite a bit
A-shot
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Up-ing this for the top notch on DXY.
QuantitativeExhaustion
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Although US Dollar DXY and Emerging Markets EEM charts do appear as an inverse relation. This is contrary to every understanding of foreign investment and currency. If US Dollar is strong, that means exports from developing countries will expand. It would only be rational and prudent to invest in EEM if the US Dollar is strong.
CosmicDust
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It might be because when dollar is appreciating fast, traders left EEM and use proceedings to buy dollars and US assets. But should a technical/chart trader care? Thanks for commenting/reasoning!
QuantitativeExhaustion
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Yes they should care. If what is true, is only not true because of irrational behavior, than you wait for an opportunity to buy or sell. You should only be using your chart to find an entry or exit, not to base technical charts off of reasons.
johan.gradin
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When people talk about “hot money”, they like to give the idea of “capital” somehow returning back to its origin, i.e buy dollars and US assets. So a “outflow” of “hot money” should give rising participation in domestic dollar “markets.”?
Not really... It is that last part that misses it.
We have the eurodollar standard, so there is no repatriation of “capital.” If “hot money” is receding in participation in foreign shores it is not going or seeking “elsewhere” (dollar or US assets) but rather relates to the always changing global dollar short. Like a balloon, the dollar short growing ever shorter (more “dollars” on offer at cheaper rates) is the global finance system filling up and acting like a “hot money” inflow. It's kind of like when people talk about credit contracting and expanding too (similar concept).