Always consider hidden risks
US Dollar Index/SP500: A Risky Mix?
October 26 2016 ( From TradingView , CNN)
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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
Greed Zone three weeks ago to the Neutral Level now at 47). 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 Tesistance
that started back since December 2 2015. (See first chart below - TopBlue Trendline) But most importantly,
broke a day later the Reistance of an Uptrend Channel. (See first chart below): Since then, we are evolving within a steep Uptrend Channel and reached on October 25 2016 on the DXY Index a level last seen in February 2016!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) and peaked on August 23 to consolidate thereafter. (See second chart below - Bottom Panel - Thick Grey Trendline - Ellipse)
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, already in negative territory on a year over year basis in percentage. (See second chart below - Middle Panel - Blue Area)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 October 25 2016 a new high ever (prior highest ever was July 22 2016) and at the resistance trendline that started back in March 2015. As domestic investors had their breakout on July 8 (SP500 Index), foreigners are near making one on their own standard major breakout (SP500 times DXY Index)... (See Third Chart Below - Top Blue Trendline - Ellipse)Foreigners will dictate the trend for the SP500 in the next few trading sessions, especially with month end quite near...
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