Good Morning!SPX futures rose to 5895.60 in the overnight session a near-perfect 61.8% Fibonacci retracement of Thursday’s decline. However, there is a good probability that SPX may rally back to the 50-day Moving Average at 5939.55 and the 50% retracement of the week-long decline nearby. Why the stronger rally? Blame it on the strong US Dollar.ZeroHedge reports, “US equity futures posted modest gains suggesting stocks may finally halt a five-day losing streak, the longest since April, although we have seen early strength quickly turn to selling so it is unclear if Friday’s modest bounce will last. As of 8:00am, S&P 500 contracts rose a modest 0.2%, fading stronger gains earlier, while the Nasdaq 100 rose 0.3%. European stocks dropped while Asian equities rebounded to erase Thursday’s losses, boosted by gains in the region’s technology companies even as Mainland China shares sank again as Chinese yields plunged to a new record low. And speaking of yields, the 10Y TSY yield ticked lower, dipping 2 bps to 4.54% while the dollar slipped from the two-year high it set Thursday. The US economic data calendar includes December ISM manufacturing at 10am. Fed speakers scheduled for the session include Barkin (11am).”
USD futures declined to 108.76 Friday morning, continuing its reversal from the Master Cycle high made on December 31. Thus, US equities have the wind at their backs for the time being. Most traders are not aware of the termination of the rising Cycle and reversal into the declining Cycle. That may come over the weekend, where the Cycles Model suggests the strength of the decline may be established.Investing.com reports, “(Reuters) -The dollar dipped but stayed close to a two-year high against a group of peers on Friday on investor bets the gap between growth in the U.S. and elsewhere will widen, while Chinese blue chips suffered their biggest weekly fall since 2022.The dollar index, which tracks the currency against a basket of six other currencies, hit its highest since November 2022 on Thursday, as the euro fell to $1.02248 also its lowest since 2022. The pound and Japanese yen were at multi-month lows too.While other currencies did manage to rebound a touch on Friday – the euro was last up 0.3% at $1.0297 – the dollar’s continued strength dominated the market mood. [FRX/] 
The SPX denominated in Euros remains in its uptrend, despite the stumble made on December 18, when the SPX made a more substantial decline. The USD cushioned the fall by rising from 106.52 to 108.00 on the 18th, stopping the decline at the 50-day Moving Average. Since the 50-day Moving Average is considered the “third rail” of traders/investors, they subsequently resumed their flow into US stocks. However, the USD did not make new all-time highs for European investors since then and now remains vulnerable to declines in the USD and the SPX. 
The SPX denominated in Yen did not make its all-time high until December 27, making it the strongest international contributor to US equities. The reason? The Yen had weakened to its lowest point on December 26 in a Cycle Inversion. After the 25% crash in the Nikkei on August 5, Japanese investors turned to US equities based on the relative strength of the SPX, making it impossible for the SPX to crash in 2024.In summary, the SPX and Yen have made reversals on December 26. The US Dollar has made its reversal on December 27. The Nikkei made its final high on July 14 and the EuroStoxx made its final high on September 27. All major stock indexes have made their maximum high and are treading on thin ice. A weaker USD may now make a panic decline in SPX possible. 
VIX futures declined to 17.30 Friday morning and may decline to its mid-Cycle support at 16.27. There is an outside probability it may have the potential to decline to its previous low at 14.27 in the next day or two, extending the Master Cycle low.More By This Author:Happy New Year Analysis
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