The Flaming Dollar

Some Key Charts And Data

If you acted on last weeks letter highlighting a possible rotation into Mega Cap Tech stocks - THE NEXT BIG ROTATION LETTER , congratulations, you’ve been well rewarded with some notable performers over the last 7 days.

In this weeks letter I’ll assess whether the market can continue to rally into year end give us the fabled Santa Claus rally.

Disclaimer: the Fed are talking later on today, and like you, I have no clue what they’ll say, so I’ve also laid out my lines in the sand.

It makes sense to start this weeks letter with the US Dollar.

Inflation data and the Fed get the headlines, but those of us who really know, know the US Dollar is what’s really driving the bus around town.

US Dollar Index (DXY)

I called the top a couple of months ago, those of you who follow me closely (and this letter) will know that already, but do you notice how stocks started going up the second the US Dollar started going down?

If the dollar continues to get burned, I think that’s an environment where US stocks are likely to thrive.

Now that we’re back to those 2017/2020 levels, I’m starting to look for clues to what stocks are going to do next.

Bond Market and S&P500

Do we trust the mainstream financial media dinosaurs, or do we trust the bond market?

The bond market has been giving bullish signals for a couple of months now.

I covered this chart back in September, it continues to put in higher lows (aka an uptrend) and for me, it continues to lead stocks higher.

S&P500 (SPX)

I know the S&P500 is the chart most of you will focus on.

Once we get Powell out the way, we’re likely to get a resolution to this chart.

The line in the sand level we’ve provided our members over the last couple of weeks has been 3,900.

I think we’d all prefer a monster break out of that technical analysis kindergarten trend line dating back to the beginning of the year.

That’s what I’ll be hoping for.

In the meantime, I still believe there are areas of the market to keep a close eye on.

SPDR Gold ETF (GLD)

If gold was ever going to have it’s time in the sun, this is it.

This chart is taken from our members ETF Chart book, we’ve been bullish gold a few weeks now.

If we’re bullish gold, we probably need to ask what the gold miners doing?

VanEck Junior Gold Miners (GDXJ)

The chart makes sense on many fronts but for new positions, I’d probably wait to see how the Fed move the markets later on today.

Same with Tech.

XLK & 10Yr Treasury Note Yield

If we see the 10Yr note decline into the end of the week, my bullish call LAST week on Tech could only just be getting started, so it makes sense to keep a close eye on that chart.

In Conclusion

There are VERY few of us have called the broader market direction correctly for the whole year. You can go through my time stamped work on our website to see that.

At these levels I’m open to everything. I like to plan ahead.

If the market rips, no problem.

If the market tanks, no problem.

Whether it’s our calls on the US Dollar, the Crash at the start of the year, or our bottom calls on Bonds, China or Europe, my philosophy remains the same.

Find the structural trends.

What are you looking for?