...this is a chart that tells us why we can't be too optimistic about equities over the next 5 years.
...those who follow this thread will know what I mean by X-mas tree retracement theory
...looking at this chart below, once the upward trajectory line breaks (which is soon), X-mas tree theory suggests that DXY could decline all the way to about 70 over the next few years, to return to 2008 level when the uptrend began.
...this means a likely -30% decline in the DXY.
...now if this is going to happen over the next few years, what do you think it does to foreign equity investment which makes up some 20% of US equities?
> they will BOLT, because an overvalued US market is already poised for a retracement and a double whammy hit on both equities decline as well as currency losses necessitates foreign investors to pre-emptively run for the hills
> I doubt that China, India and other equity markets in Asia as well as EU and Australia can remain disconnected with a falling US equity market; while in recent months, it showed some semblance but not if US declines in a notable way
...Trump 2.0 welcomes a lower dollar, but be careful what you wish for, because a falling currency on low or no confidence takes a life of its own and can overshoot significantly. And if the dollar falls in an uncontrollable way, the only option the Fed has is to lift US interest rates or maintain it higher than what equity market expects. And that would be negative for the US economy and market.
...if the AUD can go higher vis-a-vis USD despite a widening interest rate differential in the dollar's favour, that would suggest that it isn't normal and that demand for the greenback is in a lot of trouble.
The US Dollar is imploding.
Today is a glimpse into what a real commodity bull market feels like. And it hasn’t even begun in earnest.
From 2002–2008, the $ dropped 41%.
If that’s any clue—commodity bulls, buckle up. $DXY
