Last week had one of the strangest events of all time: simultaneous declines in the U.S. dollar index and the S&P 500.
This weekly chart includes a special script that calculates the simple change of the main symbol (DXY) and a second symbol (SPX). If they both move in the same direction by a user-defined threshold, the script plots a white arrow in the lower study.
Big, coordinated drops are unusual because the two indexes typically move in opposite directions. SPX is a “risk” asset while DXY is a “safe haven.” That’s why stock-market selloffs often see the U.S. dollar rally.
Since the data began in 1967, coordinated declines of at least 2 percent have only happened 15 times. This highlights the normal inverse relationship.
Adjusting the script’s threshold to -3 percent, we find last week was one of only two on record with coordinated declines of that magnitude.
In other words, markets just saw a historic coordinated weakness in both the U.S. dollar and U.S. stocks. European and Chinese benchmarks rallied at the same time, which suggests it wasn’t a pure “risk off” move.
These events occur against the backdrop of tariffs and hopes of increased German defense spending. They potentially suggest investors see more opportunity overseas following years of American exceptionalism.
The only other time DXY and SPX fell so sharply at the same time was in September 1981. That instance was less meaningful because it was just a quick pullback in the midst of a strong uptrend.
Last week, on the other hand, DXY was stuck below an earlier high and could be trending lower.
Investors may view this as a freak event. Or they may think it’s a sign of capital moving away from the U.S. Either way, it’s an unusual signal that could merit watching.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. If you're born to trade, we could be for you. See our Overview for more.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit https://www.TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
This weekly chart includes a special script that calculates the simple change of the main symbol (DXY) and a second symbol (SPX). If they both move in the same direction by a user-defined threshold, the script plots a white arrow in the lower study.
Big, coordinated drops are unusual because the two indexes typically move in opposite directions. SPX is a “risk” asset while DXY is a “safe haven.” That’s why stock-market selloffs often see the U.S. dollar rally.
Since the data began in 1967, coordinated declines of at least 2 percent have only happened 15 times. This highlights the normal inverse relationship.
Adjusting the script’s threshold to -3 percent, we find last week was one of only two on record with coordinated declines of that magnitude.
In other words, markets just saw a historic coordinated weakness in both the U.S. dollar and U.S. stocks. European and Chinese benchmarks rallied at the same time, which suggests it wasn’t a pure “risk off” move.
These events occur against the backdrop of tariffs and hopes of increased German defense spending. They potentially suggest investors see more opportunity overseas following years of American exceptionalism.
The only other time DXY and SPX fell so sharply at the same time was in September 1981. That instance was less meaningful because it was just a quick pullback in the midst of a strong uptrend.
Last week, on the other hand, DXY was stuck below an earlier high and could be trending lower.
Investors may view this as a freak event. Or they may think it’s a sign of capital moving away from the U.S. Either way, it’s an unusual signal that could merit watching.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. If you're born to trade, we could be for you. See our Overview for more.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit https://www.TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.