The US dollar index rose quickly over the past few trading days. Other major currencies like the EURO, Pound, Aussie etc weakened against the dollar and I am tempted to short them. However I am hesitant to do so as I noticed that the dollar index is approaching a resistance zone (see the red box in the attached chart). If the dollar index rally falters at resistance, other major currencies may cease to weaken and…
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The last time I mentioned this divergence was in November 2007 and it did flash future turbulence, later to be known (and still is) as The Great Recession. This 100 year old indicator can’t be used for day to day market movements but it can define turning points on the macroeconomic level. Are things different today vs 2007? Yes and No. While this divergence is technically the same, there are some abnormalities in the stock…