The Short-Term Uptrend Surprisingly Continues

One of the aspects of the market that I think is not getting enough attention is the trend of the US dollar because it has such a large influence over which areas of the market outperform. At the moment, based on this chart, I believe the longer-term trend continues to be lower, but the downtrend may be in the process of giving way to a new longer-term uptrend.

I had thought that if we got a spike in the dollar it would be a risk-off event, but as it turns out, Friday's strong jobs report implies higher short-term rates, and this pushed up the dollar, which I take as a risk-on event. 

Here is a look at the weekly chart of the dollar, which shows that it is battling against the long-term downtrend with a significant double bottom, and now it appears to have bullishly settled above the 40-week average. If it starts to trade above the March 2021 high, then I think we must declare a new longer-term uptrend.

Treasury Bonds reacted immediately to the strong jobs report with a sharp decline that sliced below the 20-day. Now, the short-term trend for bonds certainly looks lower, and we should be on watch for a change in the larger trend. Not too surprising was Friday's jump in bank stock prices, and next week we should be watching all the rate-sensitive and inflation-sensitive stock prices to see if they follow the banks higher.

That is more than enough about stock prices. For now, stocks look like they are headed higher in the short-term, but it is a difficult market to navigate for certain.

Outlook Summary

  • The short-term trend is up for stock prices as of July 23.
  • The economy is in expansion as of Sept. 19.
  • The medium-term trend is up for treasury bond prices as of June 11 (prices higher, rates lower).
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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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