Somebody flipped the switch at 10:00 EST a.m. yesterday, as oil surged and the buck sank sharply (see chart below).
Same chart, we added S&P 500 Futures to the mix to show how incredibly tight this correlation was yesterday. Risk appetite on display!
Its a simple trade it seems: buy everything else and sell the dollar, as friend of mine pointed out yesterday. Only problem is we still arent always good at predicting the direction of everything else. It is nice to look at these charts in retrospect, and sound smart, but it is never easy in real time.
The move yesterday is not good for the dollar bull cause, not that you would even know there was a dollar bull cause. Which goes to the point: dollar sentiment is quite bearish. One would say bottoming type of bearishness. But Mr. Market is climbing the proverbial Wall of Worry; a powerful climb indeed.
We saw a technical analyst on TV yesterday making a good point: He said everyone is expecting a correction in the stock market, but it doesnt have to correct yet when you consider how much it fell. He said there isnt much resistance between here and 100 points higher on the S&P. You can see that in the chart below.
And incidentally a 100 point higher move would put the S&P just at a 50% retracement level from its October high to its March lownot unusual to see stocks retrace that much and still be considered a bounce in an ongoing bear market.
Thus, a blow-off rally in stocks could mean a test of the old lows for Mr. Greenie. Then, we would know dollar sentiment will be at bottoming levels for sure.
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