USD US Dollar Weekly Chart; Long-Term Sideways Channel thru 101-106; Overbot; Negative Divergence; Upper Band Violation

Everyone is watching the US dollar index these days, the USD, or DXY, dixie, as it catapults to the moon after the late September 2024 low launching from a 99-handle to 110. Traders have been trying to call the top in the greenback and short it for the last couple months; the trading floor is strewn with their bodies.

Two weeks ago, the dollar prints a Tweezer Top. The dollar daily chart was in full negative divergence with its chart so the top call was easy on 1/13/25 for the daily time frame and the buck receives the neggie d spankdown. The negativity on the daily conspires with the neggie d above on the weekly for all the indicators except for the MACD. Therein lies the rub.

For a complete confirmation of the dollar short, the MACD line should have rolled over but instead it remains long and strong as price prints the matching top. The MACD has more fuel in the tank to bring price higher which questions the sharp down move in the green back last week.

If the MACD above would be neggie d (sloping downward as price makes the new high like the other indicators), it would mark a multi-week top for the dollar. This may still be the path ahead, however, if the MACD has anything to say about it over the next week or two, it wants price to come back up again on the weekly basis.

Price violated the upper band so a move back to the middle band at 105 is on the table. The middle band, that is also the 20 MA, ramps higher so price, the upper sideways channel S/R lines, and the rising middle band may all converge on 106.00-106.25. That would be the logical place for the bounce if she wants to come back up using the MACD as the remaining fuel.

The fractal from 2022 (blue box) may provide insight. The dollar broke higher, came back for the back kiss to those green lines, then rallied higher, then paused again (orange circle), this is where the current price behavior is at, and then the dollar placed a big 2-week spike higher to then top-out during the subsequent 3 weeks due to the negative divergence. Like now, in 2022, the dollar took the pause when the indicators were all negatively diverged except for the MACD line. With the final thrust higher, that took about 5 more weeks to play out, the MACD joined the other indicators in signaling neggie d, and the top was in, and bloop, down the dollar went to end 2022.

It gets more interesting. If the move down currently in the dollar is a fake-out, and she needs one more matching or higher price high before the top in the dollar can be called on the weekly basis, there may be Hell to pay in the stock market.

The US stock market is on the edge of a cliff right now with pebbles and small rocks falling off the side of the trail dropping hundreds of feet to the jagged rocks below. The stock markets wobbly knees keep walking this shaky path wondering when the earth will give-way. The multi-year lows in the put/call ratios verifies the euphoric bullish optimism and rampant complacency and fearlessness in the US stock market. Traders need to be taught a lesson like Cool Hand Luke. 'That's the way traders want it, so that's the way they'll git it'.

The SPX charts are also set-up or setting-up with neggie d so all the chess pieces are aligned for a potential significant negative stock market event in the days ahead. If the dollar recovers in the days ahead, and through the following week, running higher like a banshee, the stock market will likely collapse. How cool would it be to see it crash?

In the blue fractal above, when the dollar made its last move higher, that is the same time that equities were stumbling lower. 2022 was a lousy year for the stock market. It was capped off by the final surge higher in the dollar during August 2022 through October 2022, and of course the key bottom for the US stock market occurred right there at October 2022 when the dollar started to collapse from its top. For that 9-week drop in the stock market in 2022, as the dollar made its final flourish higher, the SPX puked 833 points. Let's see... give me that envelope Sonny; the back-of-the-envelope calculation, using the all-time record high for the SPX at 6128.18 on Friday, 1/24/25, would be 6128 minus 833 or 5295. A 52-handle on the SPX would get everyone's attention (-14% crash).

Alas, on the other hand of the two-handed trader, the positive outcome may occur (for stocks) where the dollar continues retreating tagging the middle band and falling below the sideways trend lines to once again favor that long-term sideways channel going forward. Simply watch the chart to see how it plays out. Once it begins going in a specific direction, you will know what is going to happen.

Keystone is not playing the dollar or other currencies long or short currently. The potential play above would be to not play the dollar now and instead wait for a week or two for confirmation to the downside, where shorts can be brought on, or, the reversal and jump higher as stocks collapse, where you can then wait for the dollar to officially top-out with neggie d on the MACD as explained above, and then play the dollar short from there for a multi-week slide lower. It will be fun to watch since the dollar direction likely dictates the direction (inverse) for the US stock market.

Of course, the timing of all this drama is on target with the FOMC two-day meeting on Tuesday and Wednesday, 1/28/25 and 1/29/25. Powell is at the cleaners this morning asking the clerk if they can get the jelly stain off of his necktie from the free buffet at the last meeting. Pope Powell will bring the tablets down from On High on Wednesday afternoon and tell traders how to trade. That is likely the pivot point that sends one of the two scenarios above in full motion forward. 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 Sunday Evening, 1/26/25, at 7:43 PM EST: S&P futures are down -40 points. That is interesting. The dollar is stronger by a hair. USD 107.58. Dollar up, futures down. Bitcoin 101.5K. 

Note Added Sunday Evening, 1/26/25, at 8:01 PM EST: S&P futures are down -50 points. 

Note Added Monday Morning, 1/27/25, at 5:50 AM EST: Dollar moves above and below the flat line overnight now down a hair to 107.29. S&P futures are down at session lows crashing -157 points or -2.6%. The Nazzy futures are off -4.6%. Don't you love the smell of napalm in the morning? Bring in the airships boys, pull your units back sergeants, time to light it up like a birthday cake. Here they come. The AI stocks are collapsing because a DeepSeek outfit in China has produced AI results with technology currently available. Just think of all the billions spent (wasted?), and the commitments to the power industry even nuclear to support AI, and a guy in his basement may have a better solution. It is hilarious. NVDA -13%. META -5%. MSFT -7%. AVGO -13%. PLTR -10%. The Trump tariff threat to Colombia, that has been reversed overnight, also has markets reeling. The VIX pops above 20 to 20.63. The 10-year yield drops -11 bips to 4.51% as traders seek the perceived safety of notes and bonds (bond prices run higher on the demand so yields collapse lower). Remember, don't panic! Don't panic!!.

Note Added Tuesday Morning, 1/28/25, at 5:34 AM EST: USD 107.88. The SPX loses 89 points yesterday, -1.5%, to 6012. The Nazzy Comp and Nazzy 100 both collapse -3.%.

Note Added Thursday Morning, 1/30/25, at 7:06 AM EST: USD 108.09. The Fed decision and press conference was yesterday. The buck is buoyant. 10-year yield 4.49%.

Note Added Sunday, 2/2/25: USD is at 108.22 printing a high on Friday at 108.40 testing the 20-day MA overhead resistance at ....... wait for it ........ wait a bit longer ...... 108.40. This is obviously a key level. If the greenback pops above 108.40, she will run strongly higher. Dollar bears must prevent 108.40 with all their might.