Source: Michael Ballanger 09/26/2022
Expert Michael Ballanger takes a look at a few charts to tell you how he believes the US dollar is doing and where he thinks the market may be heading.
I am throwing up a few charts that all confirm the arrival of the bear market, not just in the breaking of trendlines but also in the new lows registered by the Dow Jones Transports in combination with new 2022 lows in the Dow Jones Industrials.
Under Dow theory guidelines, this is a confirmed new low and does not call for a capitulation washout yet. We might get an oversold bounce, but then the retest should give me the clue as to whether or not we see a non-confirmation as either the Trannies or the DJIA close above this week’s low.
It was different for the S&P 500, which did not take out the June lows and as was also the case for the NASDAQ 100.
These are minor positives, but they do not outweigh the breakdown of major trendlines dating back to the lows of the COVID crash — a large negative.
I purposely omitted RSI and MACD studies which are quickly moving deep into oversold territory because when these declines move from “gradual” to “parabolic,” markets can stay oversold for weeks, and while the lows may be close in terms of time, they may not be close in terms of the all-important price, which is all that matters.
Watch these last two markets (U.S. Dollar Index and the 10-year UST yield) for a signal of an impending reversal in risk assets, which is basically stocks and commodities, including gold and silver.
Two final charts that may provide guidance as to the potential for some buying in early-mid-October (or toward month-end on Friday, September 30, 2022).
The first is the chart of the U.S. 10-year Treasury Yield, which is now well into overbought territory in both RSI (75.62) and MACD (0.166).
The vehicle to look at is the ETF for the U.S. long-bond (20-year) TLT:US, which began the year at USD$150 and went out on Friday at US$105.
If stocks go into freefall next week, yields will fall sharply, and TLT will go up sharply.
The next chart is the U.S. Dollar Index which has been on an absolute tear since December 2020. It was as if the dollar smelled a Fed policy shift on its way with the bond vigilantes that have been beaten in Pavlovian fashion every time they think the Fed might tighten since 2009 finally got Jay Powell’s memo calling for an anti-inflation campaign in place of a stocks-to-da- moon maximum full employment campaign.
This shift meant higher interest rates, and since money flows to where it is treated best, the sh*tshows in Brussels and Tokyo are forcing flows across the pond and into the U.S. bond market, which means dollar purchases are safe haven purchases — until they are not.
The dollar is extremely overbought with the RSI at 75.63, and MACD looks stretched. Watch these last two markets (U.S. Dollar Index and the 10-year UST yield) for a signal of an impending reversal in risk assets, which is basically stocks and commodities, including gold and silver.
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This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.
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