Stocks Trigger Sell Signal
Stocks Trigger Sell Signal;
Dollar Weakness Nears Inflection Point.
Late-July–late-Aug. Drop Expected!
08/02/17 Weekly Re-Lay Alert – Dollar Decision Dilemma:
“As the Dollar plummets to the lowest level of its 2.5 year trading range, it nears a critical decision point. The more likely scenario is that the Dollar sets an initial bottom near 92.00/DX – either bottoming just above that level or giving a quick spike below it (to scare off any premature bulls) before turning back up.
However, its 2017 action is increasing the likelihood that this support will be broken before the end of the year. One of the intriguing things will be how other markets react if/when the Dollar penetrates this support.
Though it is on a significantly lower degree (so please don’t interpret this too extremely), this action is a bit like late-2007, when the Dollar finally dropped to new multi-year (and multi-decade) lows… even though it bottomed a few points lower. Within weeks, a seemingly-unstoppable equity rally slammed on the brakes. The rest is history.
The Dollar weakness had been perceived as good news, good news, good news… and then not so good news (in the blink of an eye). And that is what is expressed in Hadik’s Axiom of Market Correlation – describing the sudden correlation of markets when the lead market (the one in focus at that time) accelerates or breaks multi-year highs or lows. In the current example, consider this…
In 2014, the Dollar & stocks rallied together.
From April–August 2015, both the Dollar & stocks corrected sharply.
From August into late-2015, both markets rallied.
From late-2015 into early-2016, both dropped sharply again.
From June 2016 into Jan. 2017, the Dollar & stocks rallied strongly – with both surging to new multi-year, new intra-decade, and new 10–12 year highs.
During that entire period, the Dollar would only move in opposition for 1–2 months before equities joined in. The overall trends were the same.
However, since January 2017, the two have moved in opposite directions for 7 months. (It would be easy to give a fundamental argument why that is to be expected… but the action of 2014–2016 would completely contradict that stance.) Up until now, stocks have paid little attention to the deteriorating Dollar. BUT… let the Dollar break below multi-year support (if that occurs) and you might see equities take notice…
Stock Indices are giving the first signs of vulnerability after fulfilling multiple upside objectives (the DJIA & SPX just reached their 1–2 year upside price targets & wave projection objectives at 21,616–22,030/DJIA & 2465–2531/SPX – shortly after the NQ did the same thing).
From a cycle perspective, the ESU & NQU set peaks on July 24–28th – allowing for a 50% correction (in time) into the Sept. 2017 cycle low (14 weeks up/7 weeks down) – the time when a 5-month low-low cycle recurs, after timing previous lows in Aug. ’15, Jan., June & Nov. ’16 & April 2017. However, it would take daily closes below 2457/ESU & 5844/NQU to confirm a multi-week reversal lower.
The Russell 2000 just added a little corroboration after turning its daily trend down. Meanwhile, the DJTA has plummeted since early-July and is nearing a critical decision point on August 4th.
All of this is reinforcing the precarious nature of the overall period from July into November (Decennial Danger Period)…1–4 week traders can sell Sept. e-mini SP futures at [reserved for subscribers only; FUTURES & EQUITY TRADING INVOLVES SUBSTANTIAL RISK]”
Stock Indices show additional signs of weakness, triggering key sell signal right after attacking multi-year upside price targets (at 21,616–22,030/DJIA & 2465–2531/SPX) & fulfilling primary objectives for completion of 2009–2017 bull market. These CRITICAL targets were met as cycles turned bearish, in perfect sync with the arrival of the Decennial Danger Period!
Dollar weakness is nearing troubling point, when additional selling could seriously burden equity markets. See Weekly Re-Lay & INSIIDE Track for additional details.