Comparison between the US Dollar, The Euro and the SPY 08-28-10

The question that I wanted a partial answer to was whether there was any correlation between the Dollar, the Euro and the Markets.  I am using the SPY as a market indicator.  It appears from the attached charts that the SPY has been moving in step with the Euro and opposite to the US Dollar.  If that relationship remains then one should be able to get an indication as to where the US markets should go.   I believe that the charts are self-explanatory.  There is an analysis of the Euro, the US Dollar and the SPY following this.

The U.S. Dollar Index Future for September (DXU0) 08-28-10

I am looking for a correlation between the Dollar, the Euro and the US markets.  The dollar closed the week at 82.78 down on the week.  There is also downside pressure being applied to price.  Price has gone through the EP for a move higher with the first price objective at 84.69.  For price to restart a move lower it would have to go through 82.04 and then the first price objective for the move down would be 80.42.  Based upon this information I would expect the Dollar to move lower.  On the lower time frames there are price objectives at 82.56 and 82.46.  Price should find some support at that level.   Neither of these levels would trigger the longer term move lower. 

 

The September U.S. Dollar Future (DXU0) 08-14-10

The Dollar had a strong week.  Price closed at 83.36, the high of the day and the high of the week.  Price has gone through the entry price for a move higher at 82.51 and the first price objective for this move should be 84.68.  In order to restart a move down price would have to go through 81.76 and then the first price objective for the move down is 80.15.  There is upside pressure being applied to price on the daily chart.  There is only one problem and that is that the indicator is moving into the over extended area of the chart. 

 

March U.S. Dollar Future (DXH0) 02-16-10

There has finally been some retracement of the dollar rally.  The dollar was down 0.73 and closed at 79.71.  The first price objective for this move down is 79.06.  The 60 min chart shows that price stopped at the target price for the move down on that chart.  There  should be temporary support at this level before the move down continues.  There is still downside pressure on the daily chart and upside pressure on the 60 min. chart.  The price action in the night session could cure the condition on the 60 min. chart.  The Dollar and the indexes are still locked.  As the dollar went down the indexes rose.  If there is more bad news from the Euro zone there could once again be a flight to safety in the reserve currency.  There is one thing that doesn’t bode well if you are looking for a major down move in the dollar.  with all the downside pressure being applied to price the dollar has held up fairly well.  There is still the cycle low at 02-25-10 that is before us.   For price to restart a move higher price would have to go through 79.78 and the target price for that move would be 80.15 with the first price objective at 79.90.  The longer term up move has not been voided at this time so the target price at 81.22 is still in play.

March Future U.S. Dollar Index (DXH0) 02-13-10

Everything denominated in dollars is affected by how the value of the dollar changes.  The dollar rises and exports become more expensive for foreign countries to buy.  Large US companies that have large overseas income streams are negatively affected.  Right now the stock indexes are coupled with the dollar.  If the dollar rises the indexes fall, gold falls as do the other commodities denominated in dollars.  If interest rates rise the dollar becomes more valuable.  The financial condition of the PIIG (Portugal, Ireland, Italy and Greece) with their debt and weak economies has created a flight to the dollar as the dollar remains the reserve currency for the world.  Another shoe has dropped with what is happening in Singapore as noted in an earlier post today.  The charts seem to confirm dollar strength.  The question remains if the dollar can continue its rise.  Time to check the chart.

The DXH0 closed at 80.40 up on the day.  Price is oscillating around the second price objective for the move up.  For price to start a retracement down it would have to go through 79.94 and then the first price objective would be 79.05.  There is currently downside pressure being applied to price and price doesn’t want to go down.  The lower time frames show support at target prices on either side of 80. 

 

The U.S. Dollar Future (DXH0) 02-11-10

It appears that the dollar is still controlling various markets.  The dollar backed off on the lower time frame charts and as of this posting, has found support at the first price objective for the retracement down.  I would not count on the dollar dropping very far at this time.  With all the downside pressure being applied on the daily chart price hs refused to give up much.  I would be very careful with long positions in items that are directly related to the dollar.  Keep your stops tight. 

The U.S. Dollar Future (DXH0) 02-09-10

The dollar, on the daily chart,  ran into a little head wind today and price went through the entry price for a retracment down at 79.90.  The first price objective for the retracement down should be 79.  There is divergance at the high and downside pressure is being applied to price on this chart.  If the dollar and the market are still coupled then there should be a rally in the market and a drop in the dollar.

Here comes the problem with a continued down move in the dollar.  The 60 min chart shows divergence at the lows and upside pressure on price.  For price to go higher it would have to go through 80.15 and then the first price objective would be 80.64.  To confirm the continued down move in the dollar price would ahve to go through the entry price for the down move at 79.72 and if that happens then the first price objective for the move down should be 79.43.  The reason that you need a new entry price for the move down to continue is that price hit a target for this move down and found temporary support there.

60 Min. Chart for the SPX ( S&P 500 Index) 02-09-10

Price went through the daily chart entry price.  Now the question is if it is a false entry.  One of the ways to tell this is to look at the other time frame charts.  In this case we shall look at the 60 min chart.  We find that price found support at the second price objective for the move down at 1045.  It has since retraced up to the second price objective for the short cycle move higher.  This should offer temporary resistance.  Price should form a congestion area or move lower in a retracement of this up move.   The target price for this move up on this chart is 1082.  For a move down to start price would have to go through 1063 and then the forst price objective for this retracement would be 1049.  The other thing to note is that price is in a channel move lower and that channel has not been broken.  One should also look at the dollar.   These two items still have not uncoupled.   On the 60 min chart there is divergence at the high and there is currently downside pressure on price.  That should mean that the entry price on the daily chart is a false entry for now.  One would need this down channel to be broken along with the other technicals to confirm this entry.  Even though we have had a gap opening this morning and a 13.78 point move up in this index doesn’t mean that the bears have gone back into hibernation.  As long as there is doubt that the European central bank will bail out Greece along with Italy, Spain, Portugal and Ireland, the dollar should remain strong.  If that is the case than the markets will remain weak.  With a higher dollar all of our exports become higher in price and therefore detrimental to the US export business and the balance of payments.  And on and on and on.  I have included a dollar overlay for the daily SPX so that you can see the correlation between the two.

The U.S. Dollar Future Contract (DXH0) 02-06-10

The dollar pushed higher towards the target price of 81.22.  It went to a new high and then backed off.  For price to start a retracement down it would have to go through 79.90 and then 79.03 would be the first price objective.  There is still upside pressure being applied to price.  The indicator is trying to turn down and there is divergence at the high. 

There has been a flight to safety and out of the Euro.  There has been a great deal of fear about the financial stability of Greece, Italy, Spain and Portugal.   If things don’t get better there it could mean the end of the Euro as a stable currency.  It would also lend credence for a push toward an international currency by Russia, China, India and Brazil.  If that happens and the dollar is no longer the worlds reserve currency, there could be major problems in the US. 

The definition of a third world country is one that imports technology and export agriculture and is deeply in debt.  Look around folks.  Are we there yet?

 

The March U.S. Dollar Index (DXH0)

The stock market and commodity markets are tied to the dollar.  Until they are uncoupled the dollar is a good indicator of what the rest of the other markets should do.  Right now the dollar continues to move higher.   Price gapped down but did not hit the entry price for the retracement down at 78.80.   The second price objective for the move higher at 80.11 is still in play.   There is divergence at this high and even though there is upside pressure being applied the indicator is trying to turn down.  If you are long the dollar, short the ags, currencies, oil or the various metals I would keep my stops very tight.  A dollar retreat would be good for the market if you go by past performance.