Always consider hidden risks
US Dollar and SP500: At Technical Crossroads?
May 23 2016 ( From TradingView , CNN)
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In these neutral times (good to know that the Fear and Greed Index
from CNN Money is coming from the Greed Zone a month ago
to the Neutral Level now at 56). 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 below the -0.70 zone on May 19 2016, indicating higher volatility ahead as history suggest... (See first chart below - Middle Panel - Blue Area - Vertical Lines)The US Dollar Index is within a Downtrend Channel (See first chart below - Top Panel - Channel) but most importantly at the Resistance Trendline that started back since January 29 2016 (See first chart below - Top Panel - Ellipse): Breaking that Channel Trendline will increase tremendously the Volatility of all US Financials Assets.
For the SP500 index, it started a Bullish Trend from an almost perfect double bottom (January 20 and February 11 2016) and failed to break yet the Resistance Trendline that started back on April 21 2016.
(See first chart below - Bottom Panel - Channel)
So both the US Dollar Index (DXY) ans the SP500 are within a technical set up that call for a higher Volatility environment as history suggest according to the DXY/SP500 correlation.
US Dollar and SP500: At Technical Crossroads? $SPY, $SPX, USDX #Trading #dxy #usdollar #SP500
US Dollar Index - DXY ( Top Panel )
DXY over SP500 Correlation ( Middle Panel )
SP500 Index ( Bottom Panel )