TLDR:
Strong Dollar kills US exports, especially value added (import raw materials and export stuff mo’ ‘spensive.) Thw chart strongly suggest the market is topping/topped. The topic is complicated, read more here. I am not going to get into either off the cuff speculation or take the effort to do more systemic modeling on how the strengthening dollar is going to play in the trade war and all that, others can do that.
I have been looking at the upcoming recession with varying serious over the last 6 months and so I have covered the topping behavior of the SPX and other indices over time and compared and contrasted the MACD, RSI, and other indicators. I have done 3 previous editions in my recession watch and now I am returning to the S&P, but this time turning my attention to the dollar. The linked post will show the other analysis.
The Chart
The 200M EMA doesn’t exist against DXY until after 2002 and we see it came into play as resistance in 2003 and it was tested as support along with the 100M EMA at the blue arrow. Future analysis will take that into account but I want to mention the 200M for the sake of the S&P.
Conclusion
The S&P 200M EMA being tested as support and maybe even broken is on the table. The $1500-$1700 for the S&P is on the table for numerous reasons and people should not discount that.
Now, if you have read this far here is a great article from Jesse Colombo and Forbes from last year where he looks at both the labor market being too tight, the yield curve inversion rate, and the Federal Funds Rate.
www.forbes.com/sites...sion-is-not-far-off/
Below is the “dollar milkshake theory” and how the current QT and tax holiday on repatriated funds has fueled this uptrend in the dollar and US equities. I have the benefit of a year on Mr. Johnson and he predicted a blow off top on equities to end the bull market. I think this uptrend after the SPX bounced off the 200w SMA is our reckless exuberance. Perhaps he would see this uptrend as I do as bear trap and call that part of the speculative frenzy/blow off top. I mentioned elsewhere I am taking an long term approach to buying inverse ETFs, so I almost get to dollar cost average my “short” position and I am going to be patient with this performing.
www.realvision.com/t...lar-milkshake-theory
Not financial advice of course. But while so many people are looking at the Fed for interest rate hikes and how that will affect the economy it seems as if almost every other factor that could come into play, EXCEPT interest rates is at play. Which suggests that when the rate increase actually happens it will be even more devastating than if they had just done it prior.
Strong Dollar kills US exports, especially value added (import raw materials and export stuff mo’ ‘spensive.) Thw chart strongly suggest the market is topping/topped. The topic is complicated, read more here. I am not going to get into either off the cuff speculation or take the effort to do more systemic modeling on how the strengthening dollar is going to play in the trade war and all that, others can do that.
I have been looking at the upcoming recession with varying serious over the last 6 months and so I have covered the topping behavior of the SPX and other indices over time and compared and contrasted the MACD, RSI, and other indicators. I have done 3 previous editions in my recession watch and now I am returning to the S&P, but this time turning my attention to the dollar. The linked post will show the other analysis.
The Chart
- The green arrow shows the last time we confirmed the 100 monthly EMA on DXY, the value of the dollar against a weighted basket of currencies, was in 1998 and after that confirmation, which took 4 months, the dollar went on a 32.44% tear over 33 months. The other posts I am linking will show that during this time the S&P was showing topping behavior as defined by the RSI and MACD.
- The red arrows show that after the 100 MA became support it later acted as resistance for about 130 months and last February to April we got done re-testing the 100 EMA as support.
- The small blacks arrow show where a DXY low and a sharp uptrend coincides with a pullback of the S&P, with the first and last black arrows having a sharper movement than the middle.
- The blue arrow shows are successful retest of the 100M EMA as support.
- The orange arrow & text shows a developing ascending triange but I am not going to zoom in on that for three reasons: (1)technically they are crap due to the high failure rate and relatively high chance of throw backs and (2)even if it fails or is thrown back the larger trend is what is important. (3) I am just writing about it here in case I ever care to return to it, I have been watching it for a while eventually I should mention it.
The 200M EMA doesn’t exist against DXY until after 2002 and we see it came into play as resistance in 2003 and it was tested as support along with the 100M EMA at the blue arrow. Future analysis will take that into account but I want to mention the 200M for the sake of the S&P.
Conclusion
The S&P 200M EMA being tested as support and maybe even broken is on the table. The $1500-$1700 for the S&P is on the table for numerous reasons and people should not discount that.
Now, if you have read this far here is a great article from Jesse Colombo and Forbes from last year where he looks at both the labor market being too tight, the yield curve inversion rate, and the Federal Funds Rate.
www.forbes.com/sites...sion-is-not-far-off/
Below is the “dollar milkshake theory” and how the current QT and tax holiday on repatriated funds has fueled this uptrend in the dollar and US equities. I have the benefit of a year on Mr. Johnson and he predicted a blow off top on equities to end the bull market. I think this uptrend after the SPX bounced off the 200w SMA is our reckless exuberance. Perhaps he would see this uptrend as I do as bear trap and call that part of the speculative frenzy/blow off top. I mentioned elsewhere I am taking an long term approach to buying inverse ETFs, so I almost get to dollar cost average my “short” position and I am going to be patient with this performing.
www.realvision.com/t...lar-milkshake-theory
Not financial advice of course. But while so many people are looking at the Fed for interest rate hikes and how that will affect the economy it seems as if almost every other factor that could come into play, EXCEPT interest rates is at play. Which suggests that when the rate increase actually happens it will be even more devastating than if they had just done it prior.
And I promise every Floridian that you will all be rich... because we're gonna print some more money! Why didn't anybody ever think of this before?
~Nathan Explosion
~Nathan Explosion
QT hasn't been just the few benchmark rate hikes we have experienced, and it hasn't just been letting the Fed's balance sheet atrophy. It has also been less publicized changes like the Federal Funds Rate going up, and it has also been the tax holiday on repatriated funds pulling dollars from overseas.
The dollar is getting more expensive and that has traditionally been bad for equities.