This is per request for DXY on the longer time frames.
Sorry for the delay to the one who requested it!
So DXY recently saw a pesuo-breakout from a cup and handle on the weekly chart:
The immediate major technical resistance on the larger time frame is at 120.
As DXY is generally inverse the broader market (SPX and DJI), the simplistic assumption here is that DXY should continue to rise as money is rotated out of the market and into cash, bonds, gold and other equities.
DXY is a hard cookie to crack from a TA perspective because it is the epitome of an equity that embodies almost purely socio-economic and geopolitical circumstances. What I mean by this is, we have to look to the instances that people, institutions etc. view cash and currency as the safest investment vs stocks and other equities.
We can see this on the monthly chart, with the largest peak extending from 1980 to its peak in 1985 when inflation was rampant (similar to today).
We can also see it again from 2000 to around 2002 when the market crashed with the dotcom bust. And we can see small spikes during each proceeding market crash, like the 2008 crash.
For this reason, DXY tends to be reactionary to these critical events. We can actually see that by plotting out its trading average and standard deviation over the past 5 years.
Over the past 5 years, DXY has trading average of 95.69 with a standard deviation of only 3.99. That small of a standard deviation is pretty telling. What it means is that DXY does not tend to deviate too far from its mean at any given time. The only time that DXY sees any type of abnormal spikes are lead by major catalysts, but these spikes are short lived as we can see on the chart.
To help put this into perspective, the trading mean for SPY is 159 with a standard deviation of 95. Insane!
But per request, I will give a little technical breakdown of the stock. But keep in mind that if you are trading DXY, the analysis that should guide DXY are not wave counts, TAs and moving averages. The analysis that should guide DXY are an assessment of the current economic and political situation of the world and more the USA.
But let's get into my math based TA:
The chart above shows the Z-Score for DXY over its past 1 year of trading data. We can see that we have broken over +2 standard deviations, which would mathematically be considered strong resistance, and are heading for 2.5, which would be the next "purely mathematical" zone of resistance.
Based on this past year of trading data, 2.5 Standard deviations would equate to a price of approximately $112.08.
If I was looking at this from a purely technical/math perspective and was swinging it, this would be a TP area for me and or an area to contemplate a short entry.
Now if we look at the 5 year Z-Score we have a bit more of a clearer picture.
We can see that, in general, DXY is happiest between -2 and + 2 standard deviations.
This year has brought DXY into an area that is 'unnatural' for it and not where it is overly content.
In the chart, you can see there are these rounding bottom dips at each major area of mathematical resistance. This seems more like DXY trying to pull back and revert back to the zone it is most comfortable in, but being rejected back up (owning to the current events).
Right now we are reluctantly heading to +4 standard deviations from its mean. +4 is only 0.5 standard deviations away and would be a price of 111.75. Completely achievable and extremely likely in my opinion.
Trading Tp:
If I were planning for the 'ultimate short', it would for sure be on DXY (and energy soon ;) ). But DXY is a no brainer short longer term, once we see a light at the end of the tunnel in our current events and if you don't mind holding for a longer period of time.
The reason for this is because of DXY's predictability. We see where it likes to rest, between -2 and +2 standard deviations of its mean. We know that sooner or later, DXY will return here. It is guaranteed owning to the type of equity DXY is. It's upside is essentially capped, so to speak. So, keep that in mind.
Anyway my thoughts, analysis and opinions.
Leave your questions/comments and critiques below!
Enjoy your long weekend Monday!
Sorry for the delay to the one who requested it!
So DXY recently saw a pesuo-breakout from a cup and handle on the weekly chart:
The immediate major technical resistance on the larger time frame is at 120.
As DXY is generally inverse the broader market (SPX and DJI), the simplistic assumption here is that DXY should continue to rise as money is rotated out of the market and into cash, bonds, gold and other equities.
DXY is a hard cookie to crack from a TA perspective because it is the epitome of an equity that embodies almost purely socio-economic and geopolitical circumstances. What I mean by this is, we have to look to the instances that people, institutions etc. view cash and currency as the safest investment vs stocks and other equities.
We can see this on the monthly chart, with the largest peak extending from 1980 to its peak in 1985 when inflation was rampant (similar to today).
We can also see it again from 2000 to around 2002 when the market crashed with the dotcom bust. And we can see small spikes during each proceeding market crash, like the 2008 crash.
For this reason, DXY tends to be reactionary to these critical events. We can actually see that by plotting out its trading average and standard deviation over the past 5 years.
Over the past 5 years, DXY has trading average of 95.69 with a standard deviation of only 3.99. That small of a standard deviation is pretty telling. What it means is that DXY does not tend to deviate too far from its mean at any given time. The only time that DXY sees any type of abnormal spikes are lead by major catalysts, but these spikes are short lived as we can see on the chart.
To help put this into perspective, the trading mean for SPY is 159 with a standard deviation of 95. Insane!
But per request, I will give a little technical breakdown of the stock. But keep in mind that if you are trading DXY, the analysis that should guide DXY are not wave counts, TAs and moving averages. The analysis that should guide DXY are an assessment of the current economic and political situation of the world and more the USA.
But let's get into my math based TA:
The chart above shows the Z-Score for DXY over its past 1 year of trading data. We can see that we have broken over +2 standard deviations, which would mathematically be considered strong resistance, and are heading for 2.5, which would be the next "purely mathematical" zone of resistance.
Based on this past year of trading data, 2.5 Standard deviations would equate to a price of approximately $112.08.
If I was looking at this from a purely technical/math perspective and was swinging it, this would be a TP area for me and or an area to contemplate a short entry.
Now if we look at the 5 year Z-Score we have a bit more of a clearer picture.
We can see that, in general, DXY is happiest between -2 and + 2 standard deviations.
This year has brought DXY into an area that is 'unnatural' for it and not where it is overly content.
In the chart, you can see there are these rounding bottom dips at each major area of mathematical resistance. This seems more like DXY trying to pull back and revert back to the zone it is most comfortable in, but being rejected back up (owning to the current events).
Right now we are reluctantly heading to +4 standard deviations from its mean. +4 is only 0.5 standard deviations away and would be a price of 111.75. Completely achievable and extremely likely in my opinion.
Trading Tp:
If I were planning for the 'ultimate short', it would for sure be on DXY (and energy soon ;) ). But DXY is a no brainer short longer term, once we see a light at the end of the tunnel in our current events and if you don't mind holding for a longer period of time.
The reason for this is because of DXY's predictability. We see where it likes to rest, between -2 and +2 standard deviations of its mean. We know that sooner or later, DXY will return here. It is guaranteed owning to the type of equity DXY is. It's upside is essentially capped, so to speak. So, keep that in mind.
Anyway my thoughts, analysis and opinions.
Leave your questions/comments and critiques below!
Enjoy your long weekend Monday!
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