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U.S. Dollar Looks in the Mirror at U.S. Stocks
And the Euro plays its role in the trend, too.
The recent bear market has led to a lot of self-reflection: Some blame others, but many blame themselves.
Have you looked in the mirror yet?
EWI's U.S. Short Term Update has, and what it sees is opportunity.
Let me explain: Social mood moves in waves. These waves – or social mood swings, if you will – reveal themselves in everything from trends in clothing, movies and music to trends in production, trade and consumer spending.
It's really our (meaning: millions of investors) collective psychology driving market activity – always has been, always will be. Armed with this knowledge, you can use market charts to spot and analyze both social and investment trends. In a way, to look at a market chart is to see yourself and your neighbors in the mirror – you can understand exactly what your investor counterparts are (or are not) thinking at any given time.
If you can break away from this pack and catch opportunities the herd doesn't see coming, you'll succeed as an investor.
Are you busting your gut to find high-confidence opportunities in this bear market but falling a bit short?
Perhaps a team of analysts working for you could help. Learn more here.
That brings us to this fascinating chart, which shows what investors have been thinking over the course of 2009.
What you're looking at is a picture of the U.S. Dollar Index against the Dow Jones Industrial Average. As you can see, the near-perfect mirror image indicates one thing: a strong negative correlation.
EWI's U.S. Short Term Update Editor Steve Hochberg talked about it in a recent Update (some forecasts removed for this publication).
"The key to the U.S. Dollar Index and the Euro direction continues to be the U.S. stock market. Specifically, we noted … that there appears to be a strong negative correlation between the DJIA and the U.S. Dollar. As the above chart shows, as the DJIA has declined, the Dollar has found a bid and rallied. This rally started from near the midline of the downward-sloping channel as well as near the point where wave C is equal to a Fibonacci .618 times wave A. As long as the wave C low remains intact, the dollar’s upward push has room to advance. The next short-term target is _____. Beyond that is the upper channel line, which right now crosses just above 85.00. We will continue to monitor the stock market’s structure for further clues as to when the dollar’s advance may start to tire. Any break of the C wave low will negate this near-term forecast.
"With the dollar rallying, the Euro is declining, with greater downside potential. As long as the _____ high remains intact, prices should come down to near _____ in the near future."
As with most correlations – negative or positive – they don't last forever. And the opportunities they present can be hard to catch and short-lived. The only way to benefit from such a trend is to get ahead of it, and that's what EWI's Financial Forecast Service is all about.
Get updates on this particular opportunity and discover many more when you subscribe risk-free to Hochberg's tri-weekly Short Term Update, part of EWI's comprehensive Financial Forecast Service. You can try it for 30 days without risking a dime.
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