For the purposes of this update USD is an indicator, much like its fellow indicator of (would-be) liquidity destruction, the Gold/Silver ratio. When the reserve currency rises along with the monetary metal vs. the more cyclical and inflation sensitive metal, it often indicates broad market pressure building.
As the market makes an in-day reversal (normal in an overbought market, as many stocks are dropping to fill the post-FOMC euphoria gaps) it reminded me to make sure I continue taking some profits (limiting losses) here and there. If the USD and GSR were to rise hard together it would be an ‘everybody out of the pool!’ type signal.
That is not happening at this time as USD wallows below resistance at 103.50. Should it take that out the markets could remain under some kind of pressure for a few days. But the important marker is still resistance at 103.50, which includes the daily SMA 200.
The GSR is not yet flashing a danger signal either.
It doesn’t mean that these indications will not go on to flash warnings. Just that as of now they are not doing so. Just an FYI on a market internal worth keeping a eye on. It’s the holidays and the markets are subject to being jerked in both directions. The hope is that looking at indicators like these will help us not get mentally whipsawed by machines doing what machines will do.
