FINANCIAL ICEBERG
Always consider hidden risks
 TECHNICALS
US Dollar Index DXY HVol: A Must Follow?
 August 04  2016 ​( From TradingView , CNN)
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The Situation

​​​​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 81).
It is interesting to look the behavior
​(Hitorical Volatility - HVol) ​of the US Dollar Index ​​(USD-DXY) ​and the
​SP500 Index (SPY ETF).


​​​Rising Historical Volatility (HVol) on the US Dollar Index (DXY) is most
​​of ​the time ​​indicative of ​a market trend change or acceleration of previous trend.

​​And falling HVol is usually associated in a bull trend or trendless market.
​​​​And rising HVol is usually associated in a bear trend or nervous market.

​​​​The US Dollar Index tested and July 25 2016
 the Major Resistance Trendline that started back since December 2 2015 (See first chart below - Top Panel - Grey Trendline - Ellipse) and failed to break it. Since then, it is in a correction wave within a wedge techncial pattern and testing the 50 DMA (Day Moving Average) zone (See first chart below - Top Panel - Red Line) and HVol is rising since July 20 2016. ( See first chart below - Bottom Panel - Grey Trendline - Ellipse)

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 second chart below - Top Panel - Thick Grey Trendline - Ellipse) , all that with HVol getting crushed which is quite unusual for a Breakout. (See second chart below - Bottom Panel - Ellipse)

​​​​​​​​As shown by the charts below, the Historical Volatility divergence between the US Dollar Index and the SP500 Index (SPY ETF) tell me that the risks have ​not ​started ​to be fully priced into the stock market yet in ​terms of volatility: expect more volatility in the SP500 in the next few sessions...​​ Especially with the US Dollar Index weakness lately. 

​​​​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 July 22 2016 a new high ever (prior highest ever was November 30 2015) and at the resistance trendline that started back in March 2015. As domestic investors had their breakout on July 8 (SP500 Index), foreigners failed making their own standard breakout (SP500 times DXY Index)...   ​(See Third Chart Below - Top Grey Trendline - Ellipse)

Simply stated, I think that the SP500 Index is becoming more and more at the mercy of the US Dollar Index Behavior in terms of trend and mainly in terms of Volatility...



US Dollar Index DXY HVol: A Must Follow? $SPY, $SPX,  USDX #Trading #dxy  #usdollar #SP500 #spy 



Financialiceberg.com
US Dollar Index - DXY 
times
​​SP500 Index
​(Daily Candles)
Financialiceberg.com
Top Panel : US Dollar Index ( DXY - Daily Candles )
20 DMA ( Yellow Line ) 
​50 DMA ( Red Line )​
200 DMA ( Green Line )​​
Bottom Panel : Historical Volatility ( MA10 - Blue Line )​
Financialiceberg.com
Top Panel : SP500 Index ( SPY ETF - Daily Candles )
20 DMA ( Yellow Line ) 
​50 DMA ( Red Line )​
200 DMA ( Green Line )​​
Bottom Panel : Historical Volatility ( MA10 - Blue Line )​