Saturday, January 7, 2012

Chart Porn: S&P and the Dollar (SPY; DXY)

From Resource Investor:
About it every 35 to 40 days we have a major profit-taking event occur in the stock market. In bull markets that's all it is, a profit-taking event. In a bear market it is a resumption of the cyclical downtrend triggered by deteriorating fundamentals. It still remains to be seen whether or not stocks have rolled over into another cyclical bear market....MORE


The fact that the dollar has consolidated for several weeks above the double top breakout is a strong sign that another powerful leg up is beginning.


Even more concerning for the bullish case is the fact that the next daily cycle should roll over into a much larger degree intermediate decline. That would almost certainly power another leg higher in the dollar and depending on how severe the stress has become in Europe we could see the October lows tested, and even broken if this is a new cyclical bear market.

The kind of selling pressure that is generated at daily cycle lows and especially during an intermediate degree decline affects every asset class to some extent...