From the Desk of Ian Culley @IanCulley

Stocks only go up.

Bitcoin is screaming its way back to the former all-time highs. Crude is printing multi-month highs. Even gold is breaking out to new all-time highs after going nowhere for years.

We’re entering the Davey Day Trader part of the cycle — green hammer and all.

Everything is trending higher. Everything except the dollar, that is…

The US Dollar Index $DXY is trading smack dab in the middle of last year’s October-to-December decline:

DXY rebounded to start the year only to find resistance at a critical retracement level.

It’s your standard trendless mess offering little insight into the dollar's next move.

While the ...

This is the video recording of our March 4th Monthly Charts Live Strategy Session

From the Desk of Ian Culley @IanCulley

What started out as a bearish reversal in the dollar-yen is beginning to look more like a bullish continuation pattern.

Buying the Japanese yen will produce absolute gangbuster returns – at some point. 

But the market’s simply not there yet…

For starters, Japanese stocks are hitting new all-time highs. These new highs support bullish USD/JPY positioning – long dollar, short yen.

Here’s an overlay chart of the Nikkei 225 Index and the dollar-yen pair, highlighting their positive correlation over longer time frames:

The USD/JPY tends to peak and trough in tandem with the Nikkei. 

We can apply the same logic to global equities, as a dollar-yen rally characterizes a true risk-on environment much like the one we’re experiencing now.

So if the Japanese stocks are taking out their  December 1989 highs, why can’t the dollar-yen do the same?

It’s awfully close to its comparable 1990 high of...

This is the video recording of the February 2024 Mid-month Conference Call.

From the Desk of Ian Culley @IanCulley

Commodity currencies are edging higher.

But given the preceding dollar rally, significant breakout levels lie well out of reach.

In the meantime, we can turn to the yen for actionable ideas.

One yen cross is already breaking out!

Check out the aussie-yen cross challenging multi-year resistance at approximately 98.50:

That’s a tradeable level marked by the 2022 high and the June and September peaks from last year.

Buyers are on the verge of cracking this key level as I write. If and when they do, I like it long with a target of 111.15 over longer time frames.

Long AUD/JPY comes with a positive carry. So I’m happy to give this position adequate time to reach our upside objective as long as price holds above our risk level.

The same applies to two additional trade setups…...

And we're back...

The new all-time highs in the S&P500 and Nasdaq100 earlier this month have been well documented.

What they don't tell you is that the equally-weighted versions of those market-cap weighted indexes are just now getting back to their late 2021 highs.

They never even broke out. In fact, they're finally just getting back to where they started.

We discussed this yesterday and what we're doing about it. I highly encourage you to watch yesterday's Emergency State of the Markets Livestream.

Here's the S&P500 Equally-weighted Index running into those former highs:

From the Desk of Ian Culley @IanCulley

"Can’t Stop, Won’t Stop."

Bloomberg Businessweek plastered that message across its cover in October 2022 – a blaring yellow dollar sign front and center.

Those days are far behind us. The US dollar is trading well below its 2022 peak, and the mainstream media is expressing little concern about its rise.

Yet a series of fresh $DXY highs are causing many investors to fret.

I don’t blame them.

Check out the US Dollar Index completing a three-month bullish reversal:

The DXY has risen more than 4% so far this year and shows no signs of slowing. I can easily see it running back to 107. 

But it's also approaching a logical level to slam on the brakes. Or – heaven forbid – it could reverse course.

Check out the critical retracement level at approximately 105.50:

...

The only real safe haven out there continues to be the US Dollar.

That's it.

When money flows into the Dollar, stocks are under pressure. You may not always see it at the index level, but you can certainly see it when you count and go one by one across the stock market.

The US Dollar bottomed on December 27th. That was also the day that the Advance-Decline line on the NYSE put in its top. It was also the day that the Russell2000 Small-cap Index peaked.

Here's the Dollar now making new 3-month highs:

From the Desk of Steve Strazza @Sstrazza

We held our February Monthly Strategy Session last week. ASC Premium Members can click here to watch the replay and download the chartbook.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends.

This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

From the Desk of Ian Culley @IanCulley

King Dollar reigns supreme, and its near-term rally shows no sign of slowing.

What can you do about it? 

You can profit from it.

Today, I’ll share with you three tactical setups for dollar strength. And they’re all close to triggering.

But, before I outline the trades, let’s look at the relationship between the dollar and stocks…

Last night, Alfonso dropped a stellar chart in Slack of the US Dollar Index $DXY overlaid with Consumer Staples $XLP relative to the S&P 500 $SPY:

The chart supports the inverse relationship between stocks and the US dollar that’s been in place for almost a decade.

Money flows out of the major stock indexes and into staples when investors are scared.

The same is true for the US dollar. That’s why these two charts look alike.

Interestingly, staples fell on a relative basis as the US Dollar Index chopped...

This is the video recording of our February 5th Monthly Charts Live Strategy Session

From the Desk of Ian Culley @IanCulley

The entire marketplace is fixated on tomorrow’s FOMC meeting.

Will the Fed make its first rate cut in March, or will it be in June?

Who knows.

I enjoy speculating as much as the next guy, but I’m not into guessing on next moves by central bankers.

I prefer to track another market participant with a Ph.D. in economics, Dr. Copper.

And we can’t discuss copper without including the Australian dollar!

Check out the Australian dollar overlaid with copper futures:

They look almost identical.

I added a 10-day rolling correlation study in the lower pane, highlighting the tight relationship over shorter time frames.

An increased bid for copper would support the current stock market rally, giving the global economy a clean bill of health. 

Dr. Copper will likely resolve in the same direction as the aussie heading into Friday’s close.

If it doesn't, the above chart suggests...