A Feisty Dollar Refuses To Correct

May 9, 2018

The Dollar Index has rallied for three weeks without a significant correction, raising the odds that April’s 89.23 low could turn out to be a very important one. Notice as well that the dollar’s romp has exceeded numerous prior peaks, including no fewer than one ‘internal’ and two ‘externals’ labeled in the chart. From a ‘Hidden Pivot’ perspective, this defines the rally as a powerful ‘impulse leg’ — i.e., one with the presumptive moxie to generate another once the inevitable correction has run its course. The technical implications would be even more significant if buyers are able to push this vehicle past yet another ‘external’ peak without correcting along the way. The number to watch is 94.22, where DXY apexed in December.

I’m monitoring the dollar’s vital signs closely; for if the bull market begun in March 2008 has resumed, then, as I wrote here earlier, “everything is about to change — and I mean everything. A strong dollar would surely flatten exports, raising trade-war paranoia to a shrill crescendo. But the main effect would be deflationary in that it would tighten the noose around the throats of all who owe dollars.  Could the stock market move higher in such an environment?  Stranger things have happened, but it seems most improbable.”

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