2026 is right around the corner, and some of the most risk-on and highest beta areas of the world are kicking off new uptrends.
These markets tend to be hard-asset plays. Ones with heavy weightings in Energy, Materials, and Financials.
They don’t rip like this unless global liquidity is loosening, the commodity tape is cooperating, and most crucial of all– the US Dollar is weakening.
All of these components are in place right now… serving up investors the perfect recipe for more international exposure into the new year.
This chart shows a coordinated breakout in Latin America $ILF and Africa $AFK as the US Dollar Index $DXY threatens to break down from a multi-cycle uptrend:
You can see it on the chart: major peaks and troughs in DXY have aligned with similar action in the opposite direction for these high-beta EM indexes. It’s been going on for the last two decades. With ILF and AFK resolving higher now, we’re looking for confirmation from the US dollar.
DXY has been trending lower all year. We’ve traded that weak dollar playbook, flagging countertrend rallies while keeping the primary downtrend front and center.
Right now, price is parked on a multi-cycle uptrend line. A decisive break below it would confirm the bearish regime, further fueling EM stocks and the hard-asset trade.
Alternatively, if DXY holds and squeezes higher here, expect a pause or shakeout in EM; that’s a risk, but not our base case.
Big picture, these rotations aren’t one-and-done. When emerging market stocks begin to move, these trends tend to persist over the longest timeframes.
Right now, we have two fresh trades in Africa.
For broad exposure, we’re looking at the Africa Index ETF $AFK:
AFK has ripped higher in a near straight line off the April lows.
Price is now pressing into a major polarity level near 27, a zone that has capped rallies for more than a decade.
Importantly, buyers have already reclaimed the ETF listing AVWAP, signaling that control has shifted back to the upside.
The short-term trend may be extended, so some digestion at these levels wouldn’t be out of the question. Structurally, the bulls remain in control
Above 27, overhead supply thins out quickly. We want to be buyers of a breakout above 27, targeting 35.
Our individual setups today offer higher beta to this theme.
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