Stocks Are Overbought but Have You Seen What's Going on With the Dollar?
The Dollar has weakened against several other major currencies this summer.
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There has been an awful lot of churning in the last few days since we got overbought. Perhaps that is the way the market is going to work this overbought reading off. I’m still doubtful that we won’t get some sort of short-term whack but time will tell.
What I do think is worth discussing is the US Dollar. I know I’ve already alerted you to it this week but it is now at the lows from the final days of 2023. And while I am finally starting to see folks comment on it I don’t yet feel like we have a full-fledged fussing going on. You know what I mean: when the folks on television start asking every single guest about the US Dollar, we know it’s gone too far.
However, it is coming into support and the Daily Sentiment Indicator (DSI) is now at 14. So, maybe it just keeps going and the DSI falls to single digits, or we get a bounce first; either way, the currency seems to be worth paying attention to.
And I know no one cares about the Dollar/Yen anymore because stocks are back up but here it is revisiting the recent lows.
Or maybe we should be looking at the Dollar vs. the British Pound which is now back to where it was in July 2023. Some might say this is all about Britain and its problems but I would be remiss if I didn’t point out the Euro too is at a similar level.
You have to squint to see it, but the Euro is over the December high and working on that July 2023 high. The DSI for the Euro is 80.
Then, if we move over to North America, we can see that the Mexican Peso looks like the Japanese Yen. It, too, is another carry trade. Thus far, I have only seen currency folks talk about it.
We all know I am a stock person, and when it comes to currencies (and bonds too!) I’m just looking at charts, but as a chart reader, I can see something is happening in the currency world and stocks –for now—are not paying attention. I would feel a lot better if stock folks were fussing over currencies the way they fussed over the Yen carry trade a few weeks ago.
Aside from all of that I would update you that the VIX has now moved up two points this week. I don’t think it is in the same place it was when I fussed over it in late July, because in late July, it had been going sideways with higher lows for months. But here too, last week folks were marveling at the decline in the VIX, but this week it’s gone quiet on that front. If it comes back down and cannot make a lower low I would really start fussing.
