Can A Weak US Dollar Really Push The Dow Higher?

July 25, 2017

Summary:

  • Recent price action.

  • Anecdotal and other sentiment indications.

  • Price pattern sentiment indications and upcoming expectations.

After hitting the 161.8 extension up off of the April 18th lows on July 14th The Dow Jones Industrial Average has moved sideways and has traded in a very tight range of less than 1% since that July 14th top. Furthermore, the pattern both up and down off of that July 14th high has been a very sloppy not giving us very much information to work with on the smaller time frames.

This very tight range in the Dow and the other major Stock indices has contributed to the record breaking low Volatility levels that we have seen over the past week which I wrote about in this article. While these record low levels of Volatility are certainly extreme and a Volatility “reset” would be welcome by many, for now, the Dow along with the rest of the US equity Indices are still holding over key support levels and have not signaled that a top is in place just yet.

Anecdotal And Other Sentiment Indications

Ever since the market bottomed in January of 2016 the pundits have been looking for that bombshell news event that was surely right around the corner causes the market to crash. From Brexit to Trump to Russia, there has been no shortage of black swans to go around yet the market just kept on plugging away higher and higher. as we are approaching the target levels that we had set out back in the early part of 2016 when the Dow was trading almost 40% below current levels we begin to see the pundits abandon their black swan theories and start to come up with new theories of how this rally can simply continue to move full steam ahead. So while not surprising, the fact that we are seeing these articles come out now as we are approaching our target zone for this large move up off of the 2016 lows is still fascinating.

As we are approaching the target levels that we had set out back in the early part of 2016 when the Dow was trading almost 40% below current levels we begin to see the pundits start to abandon their black swan theories and begin to talk about all the exogenous events that will cause this rally in stocks to continue to move full steam ahead. So while not surprising, the fact that we are seeing these articles come out now, after the Dow has moved up 40% off of the 2016 lows is quite fascinating.

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