Market Tops Take Time

Since about 2008 an ever recurring and exceedingly frustrating experience for renowned perma-bears like e.g. Michael Burry has been the Federal Reserve’s sheer infinite ability to prop up stock markets at increasing risk to the U.S. Dollar. Not surprisingly markets quickly embraced the ‘new normal’ but in regards to the global economy it’s been a slow motion train wreck in the making. After more than a decade of keeping interest rates at the barest possible mimimum the wider public is just now beginning to wake up to the brutal impact of an exponential rise in inflation.

After a strong year for the U.S. Dollar due to some international shift in sovereign debt markets a sudden shift back into a dovish outlook as taken a massive toll on the old greenback. Technically speaking we have a new possible support zone at DXY 101 – a drop below that reading may quickly trigger a renewed sell off.

In general I’m ambivalent about the Dollar as there simply are too many forces at work concurrently. The Fed, the ECB, the economy, the USD exchange rate versus other currencies. It’s a complex equation even under the most stable conditions and I recommend to simply stick with the overall trend, which at this point remains bearish despite the current counter spike.

The 10-year bond yields seems to have found a floor near the 3.4% mark (ignore the 3.8 on the chart). What’s a lot more interesting about this is that yields were barely affected by the recent Dollar weakness over the past few months.

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