Tuesday, August 14th
...Yesterday, I wrote about the recent breakout in the U.S. Dollar Index ($USD). I'd like to take that a step further today. The USD rose sharply off the January through March lows and with it was a surge in small cap stocks vs. their larger cap counterparts. During the USD consolidation that took place over the past 2-3 months, we saw small caps pull back on a relative basis. Now that the USD has broken out again, you can already see the relative strength in small caps returning:
Although the USD did consolidate for those 2-3 months, it did so in very bullish ascending triangle fashion. Those patterns typically result in a breakout to the upside and that's exactly what we've seen. Furthermore, the 10 year U.S. treasury yield ($UST10Y) continues to push higher relative to the 10 year German treasury yield ($DET10Y). That normally is accompanied by a rising dollar.......MORE
