The most recent leg of the US stock market rally and the bounces in global equities, commodities and precious metals are coming as part of an “anti-USD trade”. Certain US stock sectors, most global stock markets, commodities and precious metals were pressured by the USD rally that began in April and now, as the buck eases, a relief valve opens.
All charts below are as of Thursday’s close.
US – S&P 500
The S&P 500 – in essence a collection of sectors that are ‘pro’, ‘anti’ and ‘neutral’ the USD’s status – appears to be on the way to our target of 3000+, based on a conservative measurement of its daily chart pattern. This was the NFTRH alternate scenario after our expected summer drive to test the January top did not prove out a then favored view that the test would fail. As you can see, SPX broke out, dropped to test the breakout and off it goes. We have since been operating to the new favored plan.
It is logical that US stocks would not decline on balance if the USD weakened. That is because a key goal of fiscal policy since the 2016 election is reflation, which would have a weak USD as a component.
Global Stocks – ACWX
Global stocks (ex-US) are threatening to break a trend line from the January high. Easy on the excitement just yet, the 200 day moving average is rolling over and the 50 day is trending down. But a continued rally looks likely if USD continues to roll over. As it stands now, even this strong bounce shows why I covered a short last week on my largest position, which was against this ETF. I did not want to incur even the hard bounce, which has unfolded.
As with US sectors, there are those global markets that are more and less sensitive to the USD. The Trade War (food fight) between the US and China has distorted some of these relationships a bit, but generally Emerging Markets are seen as prime beneficiaries should the USD continue to weaken.
