Market Analysis

Freak Show

Who’s ready for a total freak show? Buckle in for I came across something interesting putting a couple of pieces of the market puzzle together.

In The Alternative View I outlined some charts I see as critically important to watch in 2021. One of these charts is the US dollar, particularly because it, against all popular sentiment, shows potential for a sizable bullish move to come in 2021.

I say potential because as chart technicians we look for predictive patterns to help assess future risk/reward. We are also perfectly aware that patterns can get invalidated or not trigger at all, but when patterns kick in and confirm price tends to follow the predicted path. Technical patterns emerge all the time and traders use them to define their entries and trade direction.

Patterns can emerge on an intraday day basis or in 15 minute charts, 2 hour charts and on longer time frames. Longer time frames are particularly notorious for testing the patience of the keen observers for they can take months to evolve and resolve.

If you read the The Alternative View you know about the declining wedge pattern and positive weekly divergence in the US dollar and I’ve been updating the  chart  on Twitter. For many wondering why Gold got hammered on Friday look no further to the US dollar which indeed began to show sudden strength after again tagging the lower trend line:

This tag happened on Friday.

Something else happened on Friday. $SPX tagged a key trend line as well:

Odd. A coincidence that the US dollar and $SPX tag key trend lines on the same day?

So I went back and overlaid both tickers on a cash chart and behold, a total freak show:

Not only are both tickers in giant wedge patterns, but the respective tags of their trend lines are virtually directly correlated.

The dollar peaked of course during the March lows, but ever since these trend lines have formed marking key pivots in price for the US dollar and the S&P 500.

Most notable here is that the lower US dollar trend line began forming in July and August, confirmed again in September and was firmed again with the tag last week. The message here: Markets are clearly reacting to this trend line and now $SPX has also confirmed its pattern with its 3rd tag of its upper trend line on Friday and rejection today.

Look also at the October/November high in the dollar marking the lows for the S&P 500. The relationship is well represented here.

The freak part in all this, to my eye, is that these wedge patterns have, for now, completely aligned in marking pivots in markets.

The declining wedge in the US dollar is a larger potential bullish pattern. The extremely large rising wedge in $SPX is a potential very bearish pattern.

Neither pattern is confirmed, both would need to see breakouts or breakdowns to confirm. And perhaps they will play ping pong first, i.e. tagging their opposite trend lines first again and continuing the pattern for longer, or they break altogether in which case markets would be subject to intense volatility and price correction.

We can’t know the when and we are respectful of the possibility these patterns may invalidate in the future, but the corollary nature of not only the price action and patterns, but their now obvious near perfect concurrent production of key price pivots at now established trend lines make this a chart correlation freak show that nobody should ignore and watch carefully.


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Categories: Market Analysis

23 replies »

  1. See video and help Sheila get the message. Forward her tweet.

    Sheila Bair
    @SheilaBair2013
    Jan 8
    Government interventions, whether monetary or fiscal, should help our vulnerable populations. Corporate America is doing just fine. Let the Fed’s corporate debt facilities die. https://cnb.cx/2Xm3G34

  2. The new BS narrative out there is that corporations are halting political contributions due to Capitol Hill fallout.

    This is total BS. Corporations are just finding ways to cut costs: reducing political contributions, capital spend and projects, and laying off people.

    But they’ll still issue bonds and sell them to the Fed and with the money they’ll buy back stock and pay executives and bonuses.

    #stoptheFedsteal
    #draintheFedswamp

  3. CNBC still stuck on the narrative of coming inflation. Another BS discussion.

    Thomas Barkin a new voting member on the Fed said there’s still room for more stimulus.

    This is all that matters. all other narratives and talking points are a distraction.

  4. Well spotted Sven. It’s been generally clear that weakening $ correlated with strengthening US stocks (for fairly obvious macro reasons) but not seen those uncanny reversal coincidences pointed out before. There are a fair few talking heads out there which see further $ weakness, I guess stawks hope they are correct. Personally I think we might see 95 on DXY (currently 90.5, your channel suggests a top around 91) before it seriously decides what to do next.

    I note that TSLA is down near 10% since I pondered last Friday if $884 was its top.

  5. Agree, total distractions everywear, the important matter is that Biden-Yellen-Rothschlds will continue this farse for american “very ignorant population”, printing all the way long for them without working, meantime the world suffers the covid Rotschld weapon.
    Until the world will say Stop!!!

  6. The next crash will be super fast and epic. To stop it, the Fed will go double infinity, send the interest rates deep under zero and throw helicopter money (you can only buy US-stocks with it) all over the USA. *lol

  7. Sheila Bair
    @SheilaBair2013

    Aug 23, 2020
    Ironically, I think the general public “gets it”. But our political leadership seems unwilling to fundamentally rethink the role of monetary policy in our economy.

    #stoptheFEDsteal
    #stoptheFED
    #draintheFEDswamp

  8. Please retweet and share widely. We need to help Sheila get the message out.

    Sheila Bair
    @SheilaBair2013

    Aug 23, 2020
    Yet, no one in either party talks about this. If there is bipartisan consensus on anything, it is to rely more, not less, on cheap debt to fuel economic growth.

    you see, it’s not about democrat or republican, liberal or conservative. Those were just distractions from the real truth which was the rich were getting richer and Congress, the Fed, the 1% are in on it.

  9. Folks, wake up and stop being sidetracked with all the distractions. This is what it’s all about.

    If you’re going to march, march for this reason.

    Sheila Bair
    @SheilaBair2013

    Aug 23, 2020
    As with the related “side effects” of yawning wealth and income inequality, sustained low interest rates help the big get bigger, stifling innovation and productivity, while inflating the value of financial assets overwhelming owned by the rich.

  10. FOX News/Hannity saying tonight that the big tech companies have too much wealth and power. But putting the blame on democrats is just a distraction.

    The truth is that the Federal Reserve buys Apple bonds and other big tech corporate bonds allowing big tech to continue to grab more wealth and power.

    Instead of blaming the democrats and liberals, blame the 1%ers (which is made up of both republicans and democrats) and the Federal Reserve, Media and Congress which are transferring wealth and power from you to big tech and leaving the 99%ers behind.

    FOX NEWS and CNN need to start blaming the Fed but they won’t since the 1% are in the media as well.

    It’s up to us the 99%ers to stop buying stocks, stop contributing to our 401Ks and hold on to whatever cash you have left.

    Time to take cash out of the bank.

    #stoptheFEDsteal
    #draintheFEDswamp

  11. Jerome Powell, Janet Yelllen, and Ben Bernanke most be exposed as the enemies of Main street, as their thieves

  12. If I chart the $VIX for the last 3 months I see a huge wedge formation with both lower highs and higher lows. The wedge still has several weeks to go before it breaks so I am thinking that about the start of the 2nd week of the Biden Presidency. Something ugly up or down is going to happen.

    Either he is successful or fails. There will be no muddle in the middle.

  13. Agree with the comments above regarding the private central bankers and all the components of the .01% thieves, parasites and criminals that are all mass murderers due to their extreme greed and economic bankrupting and debt slavery of the 99.99% of the global population. They all deserve what is coming to them very soon now.
    Regarding the SPX and USD charts my interpretation of the resolution of these SHORT term wedges is that the SPX wedge will crash and burn on 01/19/21 and so will the USD. Both are going much, much lower on a LONG term basis. 01/19/21 has the potential to be the greatest single day crash in market history. It could be -66%. That will just be the start of the decline.

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