The Catalyst for a Global Equities Rally

Global equities are on a tear.

From China to Europe to Latin America, they're outperforming the U.S. so far this year.

However, while they look strong, many key indexes are approaching critical inflection points.

These three charts illustrate exactly where things stand and highlight the potential for what might come next.

If the global growth narrative is going to play out, we need to see these international indexes break higher.

Even more importantly, EEM needs to follow suit.

Under that scenario, I want to be buying a lot of these stocks.

But here's the thing. 

There must be a catalyst for this to happen. And all the signs point to the U.S. dollar.

When investing in foreign stocks, we need to pay attention not only to the equity performance in these countries but also to how their currencies are doing against the dollar.

A clear way to visualize this is by comparing the All World Ex-US $VEU to the U.S. Dollar Index $DXY.

The negative correlation between the two has been pretty clear over the past years.

A weaker dollar acts as a tailwind, while a stronger dollar creates headwinds.

This is what I'm keeping an eye on—whether these indexes can keep pushing higher or if a potential dollar's strength is going to hold them back.

There are two possible outcomes: either we break higher, leading to increased participation overseas, or we stall at key levels, forcing these countries to take more time before making a decisive move.

I think this could be the year for global equities—but the market might prove me wrong.