Sunday, April 29, 2012

Why the U.S. Dollar is Critical for the S&P 500 Index this Week

Recently I have been advising members of my service to be cautious as the market appears to be at a major crossroads. The U.S. Dollar Index is on the verge of a major breakdown. If a breakdown occurs it will be clear that the Federal Reserve will have officially stopped any potential rise in the U.S. Dollar. 

If the U.S. Dollar pushes down below the recent lows and we get continuation to the downside, we will break the recent bullish pattern. Furthermore, if the Dollar starts to weaken it should benefit equities and other risk assets such as oil. Higher energy prices would not be long term bullish for equity markets so there is concern if the Dollar really starts to extend lower.
Over the past few months the Dollar has been producing a series of higher highs and higher lows, however the current cycle may break the pattern.....as can be seen here.

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