2024/12/22
Another 48h - Path In DXY Is Technically Clear! But Fundamental?
“the bond market is currently expecting higher inflation in 2025!
is the price action right? does the dxy follow this exceptation?”
Both the price action of the
DXY and the 
DJIA and/or the US10Y have been higher since Trump's re-election. In particular, buying pressure on the US stock markets has increased significantly again. The technology-heavy 
SP500 and/or 
NDX indices in particular benefited from this and reached several new record highs. While the DJIA has been giving way for a few days! Why? Not because of Trump - but because the scenario of growing out of US stagflation has started to crack the positive broad expectations of the US economy in 2025! What do I mean by that? Since the publication of the PPI data, I too have been asking myself: Was the Fed too early with its interest rate cuts? And I'm afraid of answering myself with yes - which is why, as you know, I closed all of our 4XSetUps. Because US inflation has risen again in the last 3 months! And if it stays that way in the next 3 months, then US inflation is likely to be higher than US growth again? And we would then be back in US stagflation - which the Democrats want to tie to the re-elected former and/or future US President Trump.Be that as it may, the breadth of the market is narrowing on WallStreet, so the cracks beneath the surface are increasing. What do I mean by that? The overheated year-end rally of 2025 is characterized by the fact that only a few winning stocks are driving the stock markets, while the majority have to accept price losses! In particular, the so-called Magnificent 7
GOOG 
AMZN 
AAPL 
MSFT 
META 
NVDA 
TSLA from the NDX - which also caused unusually high volatility in the price action after the Fed's expected interest rate decision of -0.25%; until Friday, December 20th, 2024. Four times a year, the great witches' Sabbath takes place on the world's three most important derivatives exchanges, usually on the third Friday of the third month of a quarter, when futures contracts such as futures and options expire. For me, this is all a sign of a bearish expansion across the board - because the major indices on Wall Street were mainly supported by the magnificent 7! Let's not kid ourselves - why should we? Only 7 stocks, during an US stagflation, including the fear of a rising US unemployment rate! If that's not a reason to be bearish on the stock market? I don't know! So the lack of a healthy market breadth in price action is enough for my humble person to close all positions before christianity Christmas 2024 and or jewish Hanukkah 3987. And this is also due to the fact that Trump will officially have the last word in the White House again from January 20, 2025. Because all in all, the price action on Wall Street DJIA & SP500 and/or NDX is simply too expensive in the historical context while the US economy is stagnating. And geopolitics, in our so-called West, seems to be imploding - inflation, the war in Ukraine, and/or even Israel (the Middle East). Of course - things can only get better - so "buy when the cannons are roaring!", while the mood is currently low on WallStreet, like i.e. the CNN Fear and Greed Index. That's correct. But let's just leave the mood aside (so we don't think bullish because we bought something, let alone bearish because we sold something) and then ask ourselves what will happen next with the price action in 2025? Right - I don't know! But for now, I'll remain a spectator - and wait with proud happy anticipation for Donald Trump's inauguration ceremony. And that without open 4XSetUps - at least from today's perspective...
“Let's deal first with your general theory of reflexivity.
Essentially, it has to do with the role of the thinking participant, and the relationship between his thinking and the events in which he participates. I believe that a thinking participant is in a very difficult position, because he is trying to understand a situation in which he is one of the actors. Traditionally, we think of understanding as essentially a passive role, and participating is an active role. In truth, the two roles interfere with each other, which makes it impossible for the participant to base any decisions on pure or perfect knowledge. Classical economic theory assumes that market participants act on the basis of perfect knowledge. That assumption is false. The participants' perceptions influence the market in which they participate, but the market action also influences the participants' perceptions. They cannot obtain perfect knowledge of the market because their thinking is always affecting the market and the market is affecting their thinking. This makes analysis of market behavior much harder than it would be if the assumption of perfect knowledge were valid.”
George Soros
History doesn't repeat itself - but you can rhyme the past together and/or add it up. Just like the guys from Bravo research did outstandingly in their two articles “History is Repeating Itself” & “This Time is NOT Different”. Very impressively short and to the point. However, whether in the stock market
DJIA SP500 NDX in currencies DXY and/or even the bond market US10Y - the philosophical psychological mindset is always the same. But every generation probably has to experience it for themselves. That's the way things go, human relationships! Anyway? Of course, looking back, no one saw it, no one noticed it beforehand - including me. But I don't want to come across as a fear-monger at this point. But I cannot and do not want to hold back a few factual concerns at this point regarding the fundamental overvaluation of the stock market in the historical context when it comes to price action. Both the S&P 500 Mean Reversion Model shows that the US stock market is heavily overbought and/or the Yield Curve Model shows a very high recession risk.As of September 30, 2024, the S&P 500 Mean Reversion Model shows that the S&P500 is currently trading 71% above its modern-era historical trend value, (about 2.0 standard deviations), indicating that the market is Strongly Overvalued. Why does it Matters? This is a basic model based on a fitted exponential growth rate for the S&P500. To continuously stay above the trend line suggests that the stock market must continue to grow at a continuously higher growth rate. Such explosive growth is not sustainable over long periods! The US Treasury Yield Curve is currently inverted, meaning short term interest rates are higher than long term interest rates. This unusual occurrence, called a yield curve inversion, has historically been a very reliable indicator of an upcoming economic recession. Since World War II every yield curve inversion has been followed by a recession in the following 6-18 months, and recessions are naturally correlated with decreased stock market returns. Which is why I'm not panicking now, let alone screaming sell sell sell! But at least until Trump is back in the White House, from 20th January 2025, all 4XSetUps would be dissolved just to be on the safe side - in order to realize the profits in 2024. And then to reshuffle the cards in 2025...115.110 : 2001/09/11 - High Before 911 (2001)
114.778 : 2022/09/28 - Annual High 2022
112.200 : 2001/09/17 - Low After 911 (2001)
107.348 : 2023/10/03 - Annual High 2023
106.517 : 2024/04/16 - Annual High 2024
104.951 : 2024/11/09 - last price action
102.979 : 2020/03/23 - High While Coronavirus Outbreak
100.157 : 2024/09/27 - Annual Low 2024
099.578 : 2023/07/14 - Annual Low 2023
094.650 : 2020/03/06 - Low While Coronavirus Outbreak
094.629 : 2022/01/14 - Annual Low 2022
In the historical context, 2 scenarios are important, for the USA, for the
DXY - the terrorist attacks in september 2001, and/or also the coronavirus outbreak in march 2023. Which is also more or less reflected in the price action in DXY . Why? Because since 2001, the USA has sent itself into the largest debt organization in human history by seeming to lose itself in fantastic foreign military adventures, as well as the local ones. And since the coronavirus outbreak, people have relied on green economic policy, even identity politics, under the guise of liberal democracy, which sooner or later led to politically self-organized stagflation. Which in our so-called west, most countries followed. That's why, surprisingly, at least for me, Trump was also re-elected. Of course, only the summarized tip of the iceberg - without losing track of any further details at this point. I actually believed in such a landslide success in 2022 - before the 2022 midterms! But 2024? Never! Nevertheless, if we want to understand the price action in DXY and learn something every day, we have to take this into account - regardless of our political preferences (whether Democrats or Republicans). Which is why I want to formulate the big picture at this point, which is sometimes forgotten and even ignored in day-to-day business, but from which one cannot run away; shouldn't run away - especially if we want to learn from history, even not to make the same mistakes today, to help to create a better and/or brighter future. Because an extraordinarily indebted national budget is and has always been the nucleus for major disruption in any society. And that's why we should not only take into account the annual highs and lows of this year 2024, and/or also the annual highs and lows of last year 2023 incl. the annual high and low of the last year before 2022. But rather also the highs and lows, of the week of the terrorist attacks, in September 2001. And/Or even also in March 2020 during the Coronavirus outbreak. These price actions do not play a significant role in day-to-day business - but they do in the historical context. And because we all have more or less memories and more or less all remember these two scenarios, including feelings and emotions, they should more or less also serve as support zones and/or resistance zones. But not without ignoring day-to-day business, based on current new information from central banks, the US economy, and/or other correlations with other price actions. And/Or basically, based on what I just tried to put in context in this post, we can see that the DXY tends to move in bullish terrain above 107.348 points, even the annual high of last year 2023.Anyway, whether the stock markets
DJIA SP500 NDX influence the DXY , let alone the US10Y and/or whether the DXY, even the US10Y influence the stock markets DJIA SP500 NDX ? I don't know! What I do know is that they all influence each other earlier or later more or less interactively and/or ambivalently. Nevertheless, at this point I would like to once again focus exclusively on the DXY, at the end of 2024. As I have already tried to describe, I always assume an ambivalent interactive relationship between the price action between the price actions of the stock market, the currency and/or the bond market. I do not claim to be 100% correct - admittedly - but with this hypothesis, and/or assumption for my sake, any price action on the financial market, especially with the help of cfd`s, can be operated better. According to George Soros' theory of reflection.That`s why in the current scenario, for the 1st quarter of 2025, I have switched to Jim Biancho's camp for the time being. He already said this in an interview on November 11th, 2024: “It’s Time to Position the Portfolio for Rising Yields and a Stronger Dollar”, by drawing attention to the fact that “Donald Trump’s election and the Republican red sweep are setting financial markets in motion. Because he believes that the change of power in Washington will give the US economy a fresh boost. However, it also poses the risk of inflation flaring up again, which will be a challenge for investors.” That's it - after I assumed in the summer of 2024 that the FED would only lower its interest rates in 2025 - and then only in -0.25% baby steps at all regular central bank meetings in 2025. But this scenario has now dissolved - as well as all 4XSetUps from my side. Don't just read this link - all links are worth reading and insightful. The next “Another 48h - DXY …” I will post here on Saturday, January 4th, 2025.114.778 : 2022/09/26 - Annual High Of 2022
108.541 : 2024/12/16 - Annual High Of 2024
107.815 : 2024/12/22 - last price action
107.348 : 2023/10/02 - Annual High Of 2023
106.517 : 2024/04/15 - 1st Annual High Of 2024
100.157 : 2024/09/23 - Annual Low Of 2024
099.578 : 2023/07/10 - Annual Low Of 2023
094.629 : 2022/01/22 - Annual Low Of 2022
In early 2022, the
DXY shot up as the war began in eastern Ukraine. Since then, the DXY has proven itself to be a liquid haven also due to the FED's consistent restrictive monetary policy - where everyone, including you and me (as simple private individuals who want to quickly earn legal money on the financial market). Which in turn was just a logical reaction function, if you will, due to the US government's fiscal policy. First the Corona virus outbreak and then the costs of war in Eastern Europe. Because FED boss Jay and his decision-makers were in our so-called West the fastest and highest when it came to raising interest rates from 2022. So many people invested their money in the liquid haven of the DXY - whether with a fixed interest rate, in Chicago (thanks to a higher and more expensive yield curve) and/or even with a risk premium, in New York (in the stock market). What is interesting in this historical geopolitical context, at least in my humble opinion, is the fact that the last high was in September 2022, at 114.778 - and still is today. Why? Because it's the high and low in the week of September 2001, during the terrorist attacks on the Twin Towers, the World Trade Center, which was traded at 115.100 and/or 112.200 at that time back then. And that before the historic sell-off of the US dollar began in the following spring of 2002 - down to 70.698 (in May 2008).Which is why, all in all, the last two annual highs from this year, 2024 and/or 2023, are groundbreaking! Why? Because if both of these hold - and US inflation does not fall significantly in the coming year 2025 (and the FED lowers its interest rates accordingly) - the bond market will likely continue to represent an expensive price action
US10Y in the US yield curve. Which, let's put it pessimistically, shouldn't send the DXY back towards 100 points! It is therefore important to observe the growth of the US economy out of the US Stagflation - and/or above all to include the bond market including Wall Street DJIA SP500 NDX in the thoughts about the price action of the DXY for the year 2025. Because if the terrain is at the last two annual highs in 2023 and who should also be defended by the bulls in 2024? Is the way clear for the terrain around the year 2001...107.815 : 2024/12/22 - last price action
107.348 : 2023/10/02 - Annual High Of 2023
106.517 : 2024/04/15 - 1st Annual High Of 2024
A Merry Christian Christmas 2025
and/or also Jewish Hanukkah 3597!
With best wishes and with good intentions:
Aaron
Another 48h - DXY ... is pure information material.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.