US Dollar Hits New 3-Month Highs, Zloty Falls to New Lows

JC Parets
February 14, 2024

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:

We've discussed all the deterioration in the stock market that we've seen all year. But that only got started once the Dollar began to rally.

You can see below that December 27th was also the day that US Treasury Bonds peaked.

Yesterday, those bonds went out at new multi-month lows.

The Dollar has been telling you that money is coming out of stocks, because it's the safe haven this cycle.

Treasury Bonds have been telling you that money is coming out of stocks, because it is NOT the safe haven this cycle. Stocks and Bonds have been moving together.

US 10-yr yields are making new multi-month highs. Remember this "rally" was being fueled by expectations for lower rates? Then why have rates been going up all year?

Also, why have most stocks been falling all year? That's the opposite of a "rally".

This is the type of breadth deterioration that we like to see right before a good rug pull.

While the journalists are sitting there in pretty dresses and expensive ties telling you that the stock market is "making all-time highs", it's obvious that they never even bothered to count.

Here are the stocks above their 50 day moving average hitting new multi-month lows this week. Same with the stocks above their 200 day.

And to be clear, there's nothing magical about the 50 day or the 200 day moving average. Pick your favorite number: 69 days or 123 days. It doesn't matter. You're going to get the same information, which is: Fewer stocks are going up.

It reminds me a lot of the market we had just before the Covid crash. Here's what the % of stocks above their 50 day and 200 day were doing then.

Look familiar?

For me, if the Dollar is strong, Bonds are weak, breadth keeps deteriorating and money is leaving equities, then why would I want to buy stocks?

In that environment we want to keep selling them.

Here's the Polish Zloty completing this massive top and going out yesterday at new 3-month lows.

When looking at the US Dollar Index, there's a ton of Euro in there. It's about 60% at this point. You got some British Pounds and Japanese Yen in there too.

But when you go further out on the risk curve and dive into the emerging markets currencies, you're going to get great information.

The Mexican Peso, Brazilian Real, and yes, even the Polish Zloty.

Here's a quick hack. If the Zloty is making new multi-month lows and completing this top, we want to continue to sell stocks very aggressively.

We discussed this all on last week's LIVE Video Strategy Session. All our best short ideas are detailed on the Trade Ideas page and Rangefinder App.

We'll be adding to short positions today as well and will detail them for Premium Subscribers as we always do.

If you're not already a member, you can sign up here RISK FREE.

Let me know if you have any questions.

Today is my Birthday. I turn 42 today. Cheers!

JC

 

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