Dollars & Rates: All Eyez On Me

October 2, 2021

To quote the great philosopher Tupac Shakur, "All Eyez On Me".

Makaveli - The Don would agree, if he were here, that the focus needs to be on the US Dollar and Interest Rates.

The implications will most likely impact every single asset class you've ever heard of.

Here's the recent US Dollar strength as it runs into former resistance and key Fibonacci retracement:

Was that the move in the Dollar and now we roll over?

If that's the case, it probably won't be a negative for Commodities and risk assets in general.

Notice how the Dollar stopped falling in May. That's when the NYSE Advance-Decline line and new highs list both peaked. That's also when Financials, Industrials and Materials stopped going up.

I don't think that's a coincidence.

So if the Dollar were to break out above those Q4 2020 highs, what would that mean for risk assets?

I'd argue probably not great.

Stock Market bulls are looking for a Dollar rollover here. The bears are looking for a Dollar breakout.

Stay tuned...

Meanwhile, interest rates are at key levels. Look at the US 10yr Yield trying to breakout and hold above 1.4%:

Can it do it?

Notice what happened when rates started really falling in May?

As mentioned up top, many stocks stopped going up, particularly the Cyclicals.

But with rates popping lately, look at the impact that's having on Bank stocks:

If Regional Banks are ripping, how do you think risk assets are doing in general?

My bet is they're probably doing pretty well.

So all eyes are on Rates and Dollars.

What are you seeing?

Which way are they headed?

You can find the stocks we're buying to take advantage of these trends here.

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