Always consider hidden risks
US Dollar Index/SP500: A Risky Mix?
January 18 2017 ( From TradingView , CNN, FRED)
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In these range trading times (good to know that the
Fear and Greed Index from CNN Money is coming from the
Extreme Greed Zone a month ago to the Greed Level now at 57).
It is interesting to look the behavior of the US Dollar Index
(USD-DXY) and the SP500 Index.The US Dollar Index broke on October 10 2016 the Major Resistance
that started back since December 2 2015. (See first chart below - Top Blue Trendline) .From October 10 2016 til January 5 2017, we were evolving into a Steep Daily Rising Wedge (Red Trendlines). Since then, we are into a bleeding mode. We did test on January 17 2017 the Major Trendline (Previous Major Daily Breakout Trendline) that started back since March 12 2015! (See first chart below - Yellow Trendline) Few of us realize the the US Dollar Index reached at the beginning of this year a level last seen in December 2002!
For the SP500 index, it started a Bullish Trend from the post-election on November 8 2016 and peaked on December 13 2016 to consolidate thereafter.
As shown by the second chart below, the economic impact of a strong US Dollar on US exports on a macro scale is quite direct. A strong US Dollar is having a negative effect on the US exports, so already the Trump Team inheriting a bad level in the Trade Weighted US Dollar Index. (See second chart below - Red Line)Another consequence of a strong US Dollar is to bring inflation pressure down...
But very few of us realize that for a foreigner looking at the SP500 Index on a Macro Basis (so in US Dollar Index - DXY times the SP500 Index) we did finally reach on December 20 2016 a new high ever (prior highest ever was October 25 2016) and into a daily falling channel since. As domestic investors main stock index ETF (SPY ETF) still trade +1.8% above the 50 DMA (Day Moving Average), foreigners are already testing that zone (SP500 times DXY Index)... (See Third Chart Below - Red Line - Ellipse)Foreigners will dictate the trend for the SP500 in the next few trading sessions...
US Dollar Index/SP500: A Risky Mix? $SPY, $SPX, USDX #Trading #dxy #usdollar #SP500
US Real Exports of Goods and Services
(Year over Year in % - Left Scale)
US Trade Weighted Dollar Index
(Inverted - Right Scale)
US Dollar Index - DXY
US Dollar Index - DXY