alice

NFTRH; The World vs. Uncle Buck (high priority)

A snapshot of another of our themes, that of the US dollar and global markets’ inverse relationship. As noted in NFTRH 539 ACWX (world ex-US) has approached an area where someone who is bearish might consider shorting the world. Now, are you bearish? That is the question.

The US dollar has been flogging up and down, whipsawing between the lateral support and resistance levels we’ve been following in the weekly report. Sometimes it breaks out – one way or the other – and then it head fakes and goes back into the zone.

Here is a look at the current status of USD fund UUP. It is dropping back to the short-term support of the ‘W’ mid point and the SMA 50. At this time it still looks more bullish than bearish. But it is also on a failed breakout (AKA whipsaw).

Here again is the chart we use to track the World (ACWX) and its correlation to the inverse USD. As of yesterday’s close inverse USD and ACWX were bouncing as USD dropped, and today that is being furthered.

It sounds overly simple and that is because it actually is. If USD breaks down global stocks could take what EWs might note as a 5th wave up to the 48 area while not necessarily changing the primary downtrend. If USD finds support and rallies again, ACWX likely goes bearish.

But as a chart guy and stock trader, I see my current holding FXI (China) doing this and I actually think about adding to it. It is on a clear breakout above lateral resistance and the SMA 200. EMs (EEM) and Asia (AAXJ) are somewhat similar.

So it is another update that will not make a prediction for you but I hope it is an update that will provide some context in your market management.