USD US Dollar Index Daily Chart; Positive Divergence Setting-Up; Greenback Loses Key 101-105 Support Channel; Drop in Dollar Creates Stock Market Rally

The green box shows the melt-up rally in the US stock market. The collapse in the dollar pumps commodities, copper and tech stocks higher. Multi-nationals rejoice. People become more excited and want to join the AI orgy. Short-sellers give-up and leave town creating more rocket fuel for the upside in stocks (short-covering rallies).

The bullishness for stocks is off the charts. You cannot find a bear. And comically, the bulls are proclaiming nothing but upside in stocks for the remainder of the year and say everyone is bearish. Wrong. The party is in full swing with everyone on the bull side of the boat cheering the AI orgy on the main stage.

The dollar collapses out of the 101-105 range convincingly but give it a few days to sort things out. Bank earnings begin today, in a couple hours, and then on Tuesday and Wednesday. It is interesting that the new moon peaks Sunday into Monday (stocks are typically weak). The Ukraine War may ramp-up since the side with superior night vision technology will take advantage of the pitch-black darkness.

Early May Keystone highlighted the possie d in play with the dollar and voila, the dollar bounces higher moving towards the 105 as forecast but did not quite get there; the dixie made it to 104.60. The red lines show the neggie d that formed as price continued to make matching or higher highs, so a spankdown was on tap and slap, down she goes. The down move is a 2-leg bear flag pattern so 3 sticks down, then consolidation with an upward bias, then she starts down again from 103 so the target is 100 that is achieved with USD now at 99.46.

So you know the drill. You have to wait for the possie d which will forecast the bounce in the dollar and that will likely begin the rollover in stocks. The RSI and stochastics are oversold agreeable to a relief bounce higher. Note how the MACD, stochastics and ROC are positively diverged across the last 6 months despite the drastic collapse in the dollar in recent days (hinting that more sideways is likely ahead instead of a further collapse).

The histogram is possie d wanting to see the dollar bounce, along with the oversold conditions, so a day of up would be expected, however, the RSI, MACD and ROC are weak and bleak over the last couple days reflecting the downside momentum. They want to see another lower low in price before giving the okay for the dollar to rally higher in the daily time frame.

Today's candlestick has to print but this is an end-of-day chart so this evening you can check the chart. The RSI, MACD and/or ROC may turn possie d today. At any rate, the bottom in the dollar (likely top in the stock market) is only a couple days or so away. The banks will set the mood this morning.

The dollar will likely bounce today and perhaps Monday, so stocks may be weak into and through the weekend, then back up next week as the dollar rolls back over due to the weak and bleak indicators. Next week is OpEx so a Tuesday low typically leads to a Wednesday high (professional traders will be playing this so it is likely that stocks will recover mid-week, in concert with the dollar dropping to put in its final low). From there forward, say mid to late next week, the US stock market will likely start to receive its comeuppance as forecasted by the put/call ratios exhibiting rampant, out of control complacency and fearlessness in the stock market.

Expect more sideways chop in the dollar rather than continued weakness. Price will also need to come up to test the key 101 resistance at some point forward. The dollar is currently trading at 99.76 receiving the lift from the oversold conditions and possie d with the histo. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Saturday, 7/15/23: USD 99.96. The buck tags 100.02 yesterday. If you bring up the USD daily chart, the RSI is oversold and possie d, the histogram is possie d, ditto stochastics with oversold conditions and also the ROC (all bullish). The MACD line is positively diverged over the last half-year, however, it has that downward momo over the last few days. Thus, the buck will either continue higher here and the MACD line turns up on Monday, or, a jog move is needed (down-up) where the dollar may slump for a day or so printing matching price lows again, and then the upside for the greenback on the daily basis begins in earnest (with stocks dropping). If you bring up the USD weekly chart, despite the humongous -2.3% move lower in the buck (a big currency move) last week, the RSI, histogram, MACD and stochastics are all positively diverged. There is downside momo so USD may languish in this area going forward for a few weeks or couple months, the 200-wk MA is at 98.18 and may want to be touched, but the projection forward through the end of the year and beyond is more sideways and sideways up for the dollar. This makes sense since the recession will be in play, stocks will be trending lower, and the dollar will be flat with an upward bias into year-end. The USD monthly chart wants to see some further lows so that maintains the 98.18 in play and also the 50-mth MA at 98.11. Perhaps stocks sell off over the next month with buoyancy in the dollar and then the buck rolls back over again to print its low for the year in August/September at 97-98 then up from there into year end (that would set up stock market ugliness for October-December).