The first is obvious. The US dollar index continues to push the limits. The limits being the last restraints to keeping it in a daily chart downtrend. When recalling that the weekly and monthly charts are and have been bull market charts, we have to respect the daily as well. Yet still I question… bull trap?
From last week’s short video update:
How many second chances are we going to give to the bull trap scenario?
Answer: None if it takes out March high, highlighted here. And the higher it goes (ticking a new high for the cycle this morning) more aware of risk we should be. Especially if…
…the Gold/Silver ratio is playing ball too. The GSR had been making a very pronounced negative divergence to USD but is now bouncing. On the positive side for anti-USD, pro-inflation trade players the GSR is still constrained below the moving average convergence. But this also gives us a handy reference point. If USD continues upward and GSR does too risk would be indicated as substantial across many, even most financial and asset markets.
As of this morning both charts are simply putting a test to cyclical and inflation sensitive asset markets (including gold on this phase). But from this point risk will rise markedly if the combo of USD and GSR rise as well.
We should be mentally prepared because the reason we’ve paid so much attention to these two is for exactly that reason; to be watching what matters beneath the markets, rather than cheerleading our favored assets or flying by nominal charts alone.
