Market Recoveries: be Wary of DXY

Stock and Crypto markets should be aware that, while DXY appears to be in a free fall lending fuel for the recoveries we've been seeing across markets, it could yet turn back up - thus greatly shortening the fuel for these recoveries.

Scenarios:

- Very Short Recovery across markets -- DXY turns up here somewhere between the middle of the weekly or monthly middle of the W pattern shown on the weekly chart above
- Short but Stronger Recovery across markets - DXY still turns up in the same area as above, but it spends a good bit of time hanging out here before moving up towards 118
- Extended Recovery across markets - DXY falls and stays below the red box and continues down

Comment:

Zoom out to 3 month chart still looks incredibly bullish

Comment:

Death cross on 50/200 day EMA could support further downside below 100, first cross of 50/200 EMA since it golden crossed back in August of 2021:

Crosses don't always play out, need to give it some time to see if it doesn't cross back over in the other direection first.

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Update - weekly candle opened at top of the middle of the weekly W pattern. It then wicked below and bounced above. We are now testing resistance at 103:

Recovery could be extended for 3-6 months or even a year depending on how long before DXY turns up, but it is possible it turns up much faster. Again, keep an eye on this one in relation to current market recoveries.

Comment:

RSI bounced where expected as well. Let's see if it moves up a bit and then comes back down for a 2nd bounce off the trendline:

Comment:

So far we've bounced right off the top of resistance (to dropping back below 100s). 50/200 daily MA (also EMA, but not pictured) have death crossed. Recoveries could be cut short if we get back above 108 or so. I'd like to see it turn down sharply after testing the area around the 200 day MA for recoveries to continue (area of green box)

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Update, bounced off of the green box as expected - now back down to the red box. Expecting we bounce again back towards green until it makes a decision on direction - markets may/may not see a dip if it does, but overall expecting continued market recoveries until a decision is made where it breaks through and holds above (market downturn) or below (market recoveries strengthen) either zone:

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We are back at the bottom of the red box, and RSI is looking like it may setup to repeat itself a 3rd time, and a move back up towards the green box shown below, possibly a stronger move if RSI repeats itself:

Not pictured, but in opposition to turning up here: there was a strong death cross on the 50/200 day MA, but I'd want to see RSI break its long-term trend for it to continue moving down instead of heading back up to the green box or even higher.

Comment:

There's a chance for extended and strong recoveries if this Head/Shoulders is really confirmed, but imagine it would only see a 1x measured move down towards the top of the 3 monthly wedge we broke out of. Daily chart here, will post a 3 month chart pic in a 2nd update right after:

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3 month non-log chart. The log chart could see a move down to 90ish w/ a 1x measured move. Non-log chart could potentially see a 2x measured move down to wedge top in the 70s before heading back up strong:

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Update, the head/shoulders has fully come into view. Fail and we'll head up towards 105 again. Get well above and hold above 105-108, recoveries are ending. Succeed and we could make a move back down towards old lows prior to the channel breakout, or even lower towards the top of the 3 monthly's falling wedge:

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Made a simple chart overview of my thesis on how DXY could affect markets from here, this is a 3 day view instead of the weekly or 3 month chart:

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The present weekly candle and the next one will be important in determining whether we head down and have stronger recoveries, or move back into indecision:

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Not a good sign for crypto and stock markets in breaking back above the H/S neckline here. If this gets/stays above the yellow line around 105, we're headed to 118+

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Posted a major update as a new chart here:

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If there is a case for DXY moving down, UDN (the USD Bearish EDF) could reclaim the inside of its 2 weekly falling wedge and move back towards the top, even break out of the other side. Conversely, it could continue down towards its original 1x measured target from having broken down out of that wedge:

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Lots of reasons why DXY could just be getting started on a move up. It could drop down to 89-90 first and provide more recovery, but if it continues up - we may be in for some deep market corrections:

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UUP closed its weekly above the W after breaking above it the previous week. If it remains above, it may be a good indication that DXY will be heading back up to highs sooner than later:

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Update - a look at negatively correlation on the macro Bitcoin chart as it relates to DXY:

Trade active:

Major Update - DXY dropped hard overnight and has fallen near monthly support. RSI is still holding its long-term trend. Markets will likely react positively to the drop, but we may see a strong move back up for DXY if we continue holding the monthly support and get back above weekly:

Comment:

I have an updated post here, for those still following along: