Always consider hidden risks
US Dollar Index and SP500: A Stealth Move?
July 20 2016 ( From TradingView , CNN)
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In these Greedy times (good to know that the Fear and Greed Index
from CNN Money is coming from the Fear Zone three weeks ago to the
Extreme Greed Level now at 87). It is interesting to look the behavior
(correlation) of the US Dollar (USD-DXY) and the Mighty SP500 Index.As shown by the chart below, this correlation tells that the risks have
not started to be fully priced into the foreign exchange market yet in
terms of volatility: expect more volatility in the US Dollar and SP500 in the next few sessions...DXY/SP500 correlation getting near the -0.70 zone, indicating higher volatility ahead as history suggest...
(See first chart below - Middle Panel - Blue Area - Vertical Lines)The US Dollar Index just broke the resistance of a tiny rising wedge. (See first chart below - Top Panel - Ellipse) but most importantly getting near the Major Resistance Trendline that started back since December 2 2015 (See first chart below - Top Panel - Top Grey Trendline): Breaking that Resistance Trendline will increase tremendously the Volatility of all US Financials Assets.
For the SP500 index, it started a Bullish Trend from the post-Brexit panic on June 27 2016 to make a Breakout on July 8 2016 (from a Major Resistance Trendline that started back on May 20 2015).
(See first chart below - Bottom Panel - Thick Grey Trendline)
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 not reach yet a new high ever (highest ever was November 30 2015) but very close of that resistance trendline that started back in March 2015.
(See Second Chart Below - Top Grey Trendline - Ellipse)
US Dollar Index and SP500: A Stealth Move? $SPY, $SPX, USDX #Trading #dxy #usdollar #SP500
US Dollar Index - DXY ( Top Panel )
DXY over SP500 Correlation ( Middle Panel )
SP500 Index ( Bottom Panel )
US Dollar Index - DXY