Technical Analysis and The Economy IJS Speaks

The dollar has taken investors on a wild ride since the onset of the COVID-19 pandemic lockdowns in March 2020 when the index peaked around 103, to now where the index is trading around 104. The road from then to now, however, saw a near 30% rally from the lows of early 2021 to the highs of fall 2022. While all of 2023 and so far into 2024 the index has been confined to a narrow range, with one notable attempt to break-out last fall. The reasoning behind the movements in the dollar has evolve...

The US 10-Year Treasury rolled over mid-summer 2020, and has been trending lower ever since. Meanwhile, most other markets that I follow, have spent considerable amounts of time in some level of flux, with no clear sense of direction with the price action. Gold and the Dollar have been standouts, as they have both had periods of high correlation (positive for gold vs negative for the dollar) with the US10YR. With its decisive move lower, the 10-year treasury is delivering on a promise b...

The last 18 months have been a rollercoaster ride across financial markets, but in the grand scheme of things markets really haven't gone very far, and in most cases sideways ranges have emerged as a result of all the volatility. In the world of Technical Analysis, this type of price action creates a Rectangle Chart Pattern. This type of consolidation can occur at the end of a trending market, when buyers and sellers get to a point of indecision. Past the point of indecision, a breakout...

There is this Cup-and-Handle formation that is evolving on a 3-month chart of the Dollar Index, and I think the chart is presenting at the beginning of the handle portion of the chart pattern. I’ve been watching and trend-trading the dollar index against a basket of currencies, because I believe the forex markets have the most immediate link to the macroeconomy, and we are certainly living in interesting macroeconomic times. Cup-and-Handle chart patterns tend to signal a continuation of a tre...

We get to the Treasury’s X-date and no compromise has been made on raising the US debt limit, or in other words the anarchists get their way. The most direct impact would be felt in the bond market as investors would be in a bit of a panic, rushing to move money out of fixed income. In this type of environment, cash and liquidity will be at a premium and risk will be sold across the board to cover losses on bonds and other credit instruments. Falling bond prices will push up market interest r...

Since the lows of last October (2022), financial markets have rebounded higher in-line with the post COIVD re-opening of the Chinese economy and a simultaneous mild winter in Europe. At home, we have also experienced an exceptionally resilient labor market in the face of tightening monetary policy and subsequently credit conditions. Measures of inflation in the US economy are trending lower from their post-COVID peaks of around 10%, which is great news, but being above 4% is still nowhere nea...