The US Dollar Index and the Dow Jones Industrial (March-April 2017)

• ■ Markets: Foreign Exchange, Equity Markets
• ■ Assets: US Dollar Index (USDX) / US30 (DJIA)

Financial Markets –The General Outlook

After Donald Trump’s election, investors anticipate that high inflation will return in the US. There are some good arguments backing that assumption, including new Trump’s policies regarding tax cuts, higher public investment, and the imposition of tariffs on imported industrial goods. Lower unemployment and higher wages strengthen furthermore the prospect for higher consumer prices in the future. These inflationary anticipations create positive momentum for the US Dollar and the US equity markets. On the other hand, higher inflation means higher interest rates and that signals an escape from the bullish bond market of the past 30 years. It is no secret that since November 2016, 4 trillion USD have flown from the bond markets to the equity markets. Furthermore, as concerns equity markets, the VIX equity volatility remains close to historic lows signaling the continuation of the equity rally, at least for the time.

Chart: CBOE VIX Volatility Chart (S&P500)

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Applying TCI on USDX & Dow Jones Industrial

The Trading Center Indicator (TCI) applied on the US Dollar Index (USDX) and on Dow Jones Industrial Average (DJIA). The chart below shows graphically the daily TCI indications for the period of November 2010 to March 2017. The USDX (upper) chart includes the 89-day simple moving average (SMA), while the US30 (lower) chart includes the 144-day SMA.

Chart: TCI on the USDX & US30 (Nov 2010 - March 2017)

Short-Term TCI Indications on USDX (Table)

As you can see in the above TCI chart, the US Dollar Index accumulates while TCI fluctuates in a relatively narrow range. The general US dollar trend remains bullish, but the bullish momentum is weaker than it was some months ago.

These are the daily TCI Indications regarding USDX, and the forecast for the 15 trading days ahead (press the slider below to reveal the TCI table).

TCI (Trading Center Indicator) is an innovative price oscillator developed by TradingCenter. ► More About TCI

 

Short-Term TCI Indications on Dow Jones Industrial (Table)

TCI indicates clearly that Dow Jones is trading in short-term overbought levels. (TCI recently reached +8.0%). Note that the TCI level +10% indicates major overbought market levels, evidence in the TCI chart. The short-term outlook is negative but the mid-term and the long-term US30 outlook remains positive.

These are the daily TCI Indications regarding Dow Jones, and the forecast for the 15 trading days ahead (press the slider below to reveal the TCI table).

 

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George Protonotarios for TradingCenter

March 13th, 2017