Interesting look at the Dollar versus indices

Hello all

I have been really busy in the past few days and have not been able to update this blog. Now I am back and raring to start posting again! Hope you all have had a good time in the market; looks like we had a short rally in the past few days.

Anyway, I took a look at some charts and found the US Dollar chart to be quite interesting. In general, the Dollar should trade inversely with the stock market. Simply put it, when the dollar goes down, funds get channeled into the States, and flow into the stock market. Of course there are times when both markets go hand in hand. I have charts of the US Dollar and major indices to show you all the interesting relationship between the greenback and the stock market. Enjoy.

Here is the US Dollar versus the local index. Not the best comparison, but still you can see a general relationship.

 

Next, the dollar against the S&P 500.

See the beautiful correlation between the dollar and stock markets? It is impressive to see how the two markets “find tops/bottoms together”. I will now take a quick look at the chart of the dollar to see what my analysis tells me.

The dollar had been trading in a neat downward parallel channel for quite a while. Recently it has broken out of the channel after making a low of 75. Now, I can draw an upward parallel channel. Now, what should be expected looking at the chart of the dollar? With the bullish pattern in place, I have to continue looking for strength in the dollar in the days ahead. I have a resistance level of 82 on the chart. I am going to respect this level based on what the greenback does whenever it hits this level in the past. Also, the 200-day MA is just about there too. I have to choose between being a bull or bear in the dollar. If the US dollar index gets above 82, I will be a bull straightaway. However, in the mid-term, I will look for the US dollar to continue in the general, larger downtrend.

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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