summary
We’re approaching the start of 2025, with two strong years for the US stock market about to appear in the books. But could 2025 include some mean reversion outside the 50 states? To account for this, we’ll start by focusing on the Emerging Markets ETF (EEM) and the iShares China-Large-Cap ETF (FXI). When we talk about EEM and FXI, we first look at the technical aspects of the US Dollar Index (USD). Both ETFs are very negatively correlated to the US dollar and any consideration of these foreign ETFs should be associated with at least a “potentially” negative outlook for the US dollar. The US dollar began its uptrend in 2011 and peaked in 2016. From 2015 until 2022, the US dollar followed a sideways trend and upward consolidation and exploded in 2022. After peaking in September 2022, the US dollar moved sideways before taking off in September 2024 and rises from $100. To a recent high of $108. The US dollar appears to have traced a five-wave advance and encountered chart resistance in the $108 area. Interestingly, while the Commitment of Traders (COT) data turned bullish in September, it has finally declined and is now neutral. In another week or two, the COT data could turn bearish on the USD. So the setup is in place for the US dollar to peak, which is what would happen
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