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US Dollar Trends Back Down After an Oversold Countertrend  Thumbnail

US Dollar Trends Back Down After an Oversold Countertrend

I pointed out in Downtrend but Statistically Oversold Short-Term as Gold Turns Up the US Dollar had reached a statistically oversold level, setting up a high probability for a countrend. 

Below is the chart I shared July 17th. 

Here's the same chart updated, which July 17th highlighted. 

The US Dollar entered a countertrend up after I pointed out it was oversold, but is now under pressure to reverse back down. 

It's likely we've seen the short term cyclical counter trend play out, and now the market is pricing in a soft landing for the US economy.

I say this because the US Commodity Index trended up, driven buy an uptrend in crude oil. 

US Commodity Index is in an uptrend, suggesting the market continues to price in a soft landing.

Overall, the US Dollar remains in a downtrend, despite an oversold bounce, supporting higher commodity price trends as well as uptrends in economically sensitive cyclical stocks like energy, basic materials, and financials. 

 The U.S. Dollar Index decline in July and was the second-worst performing market trend behind US Treasury bonds. 

A continuation of this downtrend in the US Dollar should continue to support the commodity-related sectors like energy and basic materials.

Energy and basic materials also exhibit the most negative correlation, or sensitivity to the U.S. Dollar Index. 

How these markets interact with each other also suggests the market is pricing in a soft landing for the economy. The global capital markets seem bullish on the US economy based on these trends in money flow. 

Intermarket relationships are interesting, but they don't always play out as expected, which is why we focus instead on the direction, momentum, and volatility of price trends for actual buy and sell signals, rather than expected intermarket correlations of how these markets should interact with each other. 

Mike Shell is the founder, President, and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of Asymmetry® Managed Portfolios.  Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies. Shell Capital provides investment advice and portfolio management to clients with separate accounts at Goldman Sachs Advisor Solutions with an investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell, or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not individualized advice and is subject to change without notice. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. If this website contains information regarding Options Trading, please read the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). Options involve risk and are not suitable for all investors. The views and opinions expressed in Asymmetry® Observations and Asymmetric Investment Returns are those of the authors and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.