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The Dollar is still on the cusp, with the bulls and bears in the midst of a major battle in the 92-93 region. But in reality is the bond market that is driving the direction of the Dollar, with spreads between USÂ and German Yields continuing to contract. But first, we start with equities.
Equity Market
The S&P 500 went nowhere today, with Biotech (IBB) and Tech (XLK) giving some back, while the Financials (XLF) appeared to stage a break higher, but that failed as the market got nervous about the escalating tensions with North Korea. For the most part, the market has paid little attention at all to the recent developments. It is unlikely that that changes either, with a VIX Index spiking to around 11, which is still at very very low levels.
VIX by Scorpio244 on TradingView.com
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Financials
Financials continue to trend higher, with today’s pull back likely to just be a speed bump. The ETF managed to stay above support and appears to be putting a double bottom in place.
XLF by Scorpio244 on TradingView.com
The Dollar
A break in the Dollar Index of the 92-93 level continues to be a major battle ground, and if the index breaks that level, it is likely looking to move considerably lower.
DXY by Scorpio244 on TradingView.com
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Yield
And if you want to know what the market thinks about the state of the US economy vs. the situation of the European economy, look no further than the spreads between the 10-Year treasury and the 10-Year German Bund. With that spread narrowing considerably since the start of the year.
10-UST vs. 10-Bund by Scorpio244 on TradingView.com
And that is why the Dollar has been under so much pressure. The perception and the potential reality that Europe is likely to stop seeing accommodative policy and that its economy is improving.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.