SPX vs Dollar strength
Updated
DXY closed at top of resistance line and looking at candles it looks very bullish. Judging by the chart next week we should be expecting break to upside. This is the time when I take step back and try to asses situation from multiple angles.
Regarding elections we have huge uncertainty in the air, judging by results we will have democrat president with democrat congress and republican senate, and in my eyes is not very bullish. Chances of huge stimulus are very slim, so I am less convinced in this rally, market will have to start pricing in this fact.
We are still don’t have vaccine and I doubt we will have it before next summer what makes this winter really hard, cold and harsh and this too is not bullish sign. We have record number of new corona cases in US, half Europe in some sort of lookdown and we going to have even more lockdown’s going into winter. This will increase unemployment level, and make people even more careful about spending. Stockpiling shopping already started in Germany (what’s the deal about needing truck full of toilet paper) that actually increases spending but only on groceries, people tend to buy only what they believe that need to survive pandemic, they aren’t going to start buying new flat screen, tv’s, cars, etc. I expect total flop of winter tourism, what will drag even more economy down, a lot of skiing towns in EU, still not sure will they even open ski lifts, that’s really not bullish.
All in all, I don’t see any bullish development in markets over winter and believe we are on turning point to downside.
On technical side:
in comments chart 1
If we look at SPX chart, we can see clear triangle pattern and this week rally was fast and furious and it looks kind of exhausted and overdone. There is clear bearish divergence on daily chart on RSI. We can huge selloff at 3600 level now we barely got to 3520. Before march selloff the was too clear bearish divergence and I believe we would have selloff at that time regardless of pandemic, pandemic only accelerated things and justified the move.
in comments chart 2
if we look at DXY chat we can see we are exactly on the trendline where I expect USD reversal EURUSD was almost at 1.19 perfect for reversal.
in comments chart 3
we also need to take a look at VIX
in coments chart4
it broken dynamic support but it’s very close to horizontal support at 24.
What bring us to first chart where we can see SPX chart multiplied with DXY. And it shows us really something interesting.
Pre pandemic top was 3386 and since dollar was devalued, we actually never crossed ATH even worse we are almost 100 points below. What leads me to that this week rally and was driven with large USD selloff to mask actual levels of stock market. This also was done in a manner so that Dollar and VIX capitulates taking a lot of stops out and preparing for a huge turnaround.
Having said all that I am convinced that on Monday we will gap down and going back to triangle support, this may or may not trigger even larger selloff and we are yet to see if triangle will hold in weeks ahead.
Thank you all for reading. Write your thoughts.
Regarding elections we have huge uncertainty in the air, judging by results we will have democrat president with democrat congress and republican senate, and in my eyes is not very bullish. Chances of huge stimulus are very slim, so I am less convinced in this rally, market will have to start pricing in this fact.
We are still don’t have vaccine and I doubt we will have it before next summer what makes this winter really hard, cold and harsh and this too is not bullish sign. We have record number of new corona cases in US, half Europe in some sort of lookdown and we going to have even more lockdown’s going into winter. This will increase unemployment level, and make people even more careful about spending. Stockpiling shopping already started in Germany (what’s the deal about needing truck full of toilet paper) that actually increases spending but only on groceries, people tend to buy only what they believe that need to survive pandemic, they aren’t going to start buying new flat screen, tv’s, cars, etc. I expect total flop of winter tourism, what will drag even more economy down, a lot of skiing towns in EU, still not sure will they even open ski lifts, that’s really not bullish.
All in all, I don’t see any bullish development in markets over winter and believe we are on turning point to downside.
On technical side:
in comments chart 1
If we look at SPX chart, we can see clear triangle pattern and this week rally was fast and furious and it looks kind of exhausted and overdone. There is clear bearish divergence on daily chart on RSI. We can huge selloff at 3600 level now we barely got to 3520. Before march selloff the was too clear bearish divergence and I believe we would have selloff at that time regardless of pandemic, pandemic only accelerated things and justified the move.
in comments chart 2
if we look at DXY chat we can see we are exactly on the trendline where I expect USD reversal EURUSD was almost at 1.19 perfect for reversal.
in comments chart 3
we also need to take a look at VIX
in coments chart4
it broken dynamic support but it’s very close to horizontal support at 24.
What bring us to first chart where we can see SPX chart multiplied with DXY. And it shows us really something interesting.
Pre pandemic top was 3386 and since dollar was devalued, we actually never crossed ATH even worse we are almost 100 points below. What leads me to that this week rally and was driven with large USD selloff to mask actual levels of stock market. This also was done in a manner so that Dollar and VIX capitulates taking a lot of stops out and preparing for a huge turnaround.
Having said all that I am convinced that on Monday we will gap down and going back to triangle support, this may or may not trigger even larger selloff and we are yet to see if triangle will hold in weeks ahead.
Thank you all for reading. Write your thoughts.
Comment
all my comments with charts get deleted so use your imagination or give me more rep so I can post them in ideas :-(Disclaimer
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