Trump Speech a Dollar Bust?
Stock-Markets / Financial Markets 2017 Feb 28, 2017 - 02:41 PM GMT
Good Morning!
The USD is in the limelight again today. It has failed to better the February 15 high at 101.75, giving USD a sharp Wave 2 correction last week. Yesterday it bounced off Intermediate-term support at 100.73, but was unable to even match its 50-day Moving average at 101.37. This morning’s high was 101.22. The Cycles Model suggests the next Master Cycle low may be due on March 8, but could extend as much as another week beyond. A Pi date occurs on March 13, which matches up with a possible low in SPX as well.
ZeroHedge comments, “Trump Speech May Mark Turning Point for Dollar Trend
If Donald Trump’s speech Tuesday is long on hyperbole and short on details, it may be the end of the dollar’s reflation trade. Dollar-yen traders could be giving the clearest hint on the outcome.
The president’s speech will likely impact the Federal Reserve’s March decision and set the tone for the dollar for the next quarter. Despite the dollar’s slight gains during Monday’s trading, the trend since January is still down.”
SPX futures have eased a bit, but are still above the trading channel trendline at 2365.00.
ZeroHedge reports, “With traders focused on President Trump's address to Congress tonight where he is expected to outline his economic priorities and provide plan details, European stocks are little changed for a second day and Asian stocks decline modestly as U.S. futures trade around the flatline. Oil declines, trading just under $54, while the dollar is little changed. Before the open, the US reports the second reading of 4Q GDP, with attention also on the Chicago PMI print as well as the Conference Board consumer confidence index. Salesforce and Ross Stores are among companies reporting.”
VIX closed above its 50-day Moving Average, but has be hovering in that area for the past two weeks. It appears that a breakout above 12.52-12.86 may be necessary to produce an aggressive buy (SPX sell) signal. There is a good reason for that. You can see that the Moving Averages have all declined from a higher range in the past three months, due to the decade-long Cycle Bottom. The daily mid-cycle resistance is at 13.73. Even that support/resistance line has declined.
Many traders use a fixed number in the VIX to denote rising risk. The fixed numbers usually vary between 15 and 25. However, the 50-day Moving Average in SPX is only 3.5% from the top (2189.55), so waiting for a fixed number may cause an unnecessary delay in a sell signal. Remember, the VIX is meant to be an early indicator of a change in trend.
It’s the Hi-Lo Index that gives us the delayed and final confirmation.
TNX may have reversed into its final decline of Wave (iii), which may be the largest in this series of Waves. The next Master Cycle low is due in the week of March 13, the same as SPX and a week later than USD.
Conclusion: Unless the cycles Model is wrong, the Trump speech appears to be a big bust.
Regards,
Tony
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