US Dollar likely should begin to pull back to new monthly lows

Short-term trends in US Equities remain bullish but could face some consolidation starting this week, potentially, given a combination of slowing breadth following the steep run-up to overbought territory.   Treasuries and the US Dollar look to be close to inflection points, which could drive both Yields and the US Dollar back to new monthly lows. Emerging markets should begin to strengthen as DXY rolls over, and I expect to see precious and base metals also start to gain in relative strength in the weeks ahead. At present, despite SPX having reached an area which looks important from a price perspective, time factors still look somewhat premature in signaling a potential top.  For now, price has not given any indication of breaking its uptrend, and until this happens, it remains right to stick with this trend.  I anticipate that a push higher in Technology this week should begin to find resistance, and that breadth could show some signs of waning this week.

As shown below, there remains no evidence of any trend reversal, and Moody’s debt downgrade failed to take either Treasuries or Equities lower, with both reversing early day weakness by Monday’s close.

Market breadth finished flat despite the late-day recovery, and despite 8 sectors finishing positive on the day, Technology’s weakness resulted in breadth finishing flat.

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