Markets fluctuate to a relentless beat driven by fear, greed, and an incessant newsfeed.
Sometimes, they trend.
But, more often than not, they churn sideways.
Unsurprisingly, “sideways” best describes most markets today.
The S&P 500, the Nasdaq 100, and the Dow Jones Industrial Average have gone nowhere in three months.
Regardless, one uptrend remains intact…
The coordinated rise in the US dollar and interest rates.
Check out the overlay chart of the 10-year US Treasury yield $TNX and the US Dollar Index $DXY with a 21-day rolling correlation in the lower pane:
US yields and the dollar have been in near-perfect harmony since the Fed began raising interest rates last year.
Sure, they briefly fell out of step. But the two found their groove in early July.
The DXY challenges its year-to-date highs while the 10-year yield closes on its highest print in over a decade.
The result: Bonds continue to break down. Global currencies fall against King Dollar. And major US equity indexes appear vulnerable to selling pressure.
It sounds strikingly similar to last year, as does the relative strength from energy.
Choppy conditions at the index level hide pockets of strength beneath the surface, such as energy.
(Remember, energy composes 4.1%, 0%, and 3.1% of the S&P 500, Nasdaq 100, and the Dow, respectively).
