Stock Incubator

[dalcindo]

Re: $USD - Inverse Relation, But How Long?
- US vs. European, Asian Markets:

Hi, 3x!

$USD does seem to react inversely to $COMPQ and $SPX (See Chart #1 below: Inverse Correlation & Relative Strength chart below).

Obviously, the risk-seeking investors that have taken positions in US or foreign equities/indices have provided the greatest influence by trying their luck out of the dollar into bullish markets, then seeking shelter back in the $USD's safe-haven in bearish weathers. Stockcharts.com does not provide any more data past 2007, but that relationship from that data provider remains clear about this inverse relationship dating since about July 2008, when the dollar soared against plummeting US markets.

As I mentioned in prior entries, I have set the US rally high to around $81.00, a point at which technical chart features would be calling for some unwinding. Most influential so far in the monthly chart has been the 45-EMA, currently valued at $81.21 in Chart #2 below - As the greenback continues ins ascent within the confines of that bullish channel (validated since 2008), I am expecting a serious level of resistance at the mid-channel level. So if current momentum continues, that would set a target near $83.00. So, on average, a technical target of $82.00 becomes very reasonable, especially if the currently bearish market continues to provide its influence on the USD, as the risk-adverse crowd of investors continues to come home.

The question becomes: How long is this inverse relation lasting? I believe that the market is currently revaluing the $USD in relation to the total US equity market, and that the answer may come as soon as this year. 2008 was the year of formation of this inverse relationship, whereas 2009 was a year of migration in and out of the US currency (i.e.: maintaining that relationship). 2010 may become the year when investors equate a faltering market with a faltering US Dollar, if and only if foreign markets continue to rally against the European and US markets (i.e.: old world market vs. new and more efficient dynamic markets).

In an older entry, I remarked that our US and European populations are composed of a majority of retiring individuals whose wealth has been diminished, and their health care stress on either economies will growingly pressure their respective countries downwards, while the youth would be replacing the skilled labor at too slow of a pace.

A propos of inverse relationships, Asia is dealing with the opposite demographic conundrum. Lots of young, dynamic firms and mind ready to work longer, harder with an insatiable appetite for the things we are growingly failing to afford over here: time, financial risk, and credit worthiness.


The wheel is turning:
See for instance how the majority of the European markets (not including US market) have failed their 200-EMA (Chart #3-5 below) COMPARED TO Asian markets that have remained over their 200-Weekly EMA (chart #6-8 below):


Chart #1: $USD vs. $SPX/$COMPQ - 3-Year, WEEKLY Chart:



Chart #2: $USD - 10-Year, monthly Chart:



Chart #3-8:
$CAC - 36-Mo., Weekly Chart:



$DAX - 36-Mo., Weekly Chart:



$FTSE - 36-Mo., Weekly Chart:



$HSI - Hong Kong Hang Seng - 36-Mo., Weekly Chart:



$NIKK - Tokyo Nikkei Avg. - 36-Mo., Weekly Chart:



$STI - Singapore Strait Times - 36-Mo., Weekly Chart:




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Message in reply to:
$USD breaking that 50dma resistance is crucial for continuing its uptrend,
82 would be the next stop, see how the market reacted inversely to the $$$ movement since summer 2008, current support at 9845



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DAA