This is a long term chart of the dollar index. The overlays are: 1) long term regression, 2) 36 month Bollinger bands. The vertical green lines are cyclical "peaks" in the FED Funds rates.
Several observations: With the exception of the far left vertical green line, an exceptional period in 1981 when Volcker raised rates to 22 %, all the subsequent peaks in Fed Funds Rates were followed by a declining dollar index. Also, when the dollar index stretches to the upper band, it is followed by a pullback. Currently the index is stretched along the upper band.
Not shown on this chart is the 36 month Bollinger band for the SPY, which currently shows the SPY dipping just below the 36 month mid-line average. In the past, a dip to the range of 36 month moving average for the SPY signaled a bottom.
Conclusion: It is possible the dollar index continues to rise toward its prior peak, around 120. But it is nearing a turning point, which will most likely occur after the FED ceases or pauses the current rate hikes. It is my opinion that the SPY has likely bottomed, It may test the bottom again, but I think it unlikely that it will go much lower than the prior bottom around 349.
Should the FED pull a "Volcker", then all bets are off.
Several observations: With the exception of the far left vertical green line, an exceptional period in 1981 when Volcker raised rates to 22 %, all the subsequent peaks in Fed Funds Rates were followed by a declining dollar index. Also, when the dollar index stretches to the upper band, it is followed by a pullback. Currently the index is stretched along the upper band.
Not shown on this chart is the 36 month Bollinger band for the SPY, which currently shows the SPY dipping just below the 36 month mid-line average. In the past, a dip to the range of 36 month moving average for the SPY signaled a bottom.
Conclusion: It is possible the dollar index continues to rise toward its prior peak, around 120. But it is nearing a turning point, which will most likely occur after the FED ceases or pauses the current rate hikes. It is my opinion that the SPY has likely bottomed, It may test the bottom again, but I think it unlikely that it will go much lower than the prior bottom around 349.
Should the FED pull a "Volcker", then all bets are off.