Bet your lowest dollar (which not many people look at the US dollar)


Yes, we pulled out on Monday, but there was no sale. It dried up. There wasn’t much buying either, but the sales were minimal.

The simplest way to look at this is that after the initial lower open, the upside volume was greater than the downside volume for the Nasdaq and the New York Stock Exchange for most of the day. The NYSE ended with volume up 67% and the Nasdaq ended with 59%. The market always looks at me askance.

But other than that, it was a pretty sleepy day in the market. Oh sure, the precious metals have finally kicked in and joined the inflation trade, but let’s go back for a minute and talk about the US dollar. Everyone seems to be on the inflation trade now. Just watch Barron’s, who isn’t exactly known to be ahead of the curve, and find out what their coverage history was like last weekend:

I can’t help but think about it, because first of all, precious metals are usually the first area to move when thinking about inflation, and here they seem to be the last to finally come out of the box. . And second, who doesn’t see inflation?

Then there is the US dollar. No one even seems to be discussing it anymore, but it’s a big drop since early April, right? And now he finds himself testing the medium for the second time in a week and the fifth time this year.

The Daily Sentiment Index (DSI) for the Dollar Index is currently at 18. We all know that if the DXY breaks that support around 90 it will attract a few eyeballs. Maybe even hysteria. And probably a DSI read that approaches, if not dips, into a single digit.

As a reminder, single digit readings in the DSI are extreme. Recall that bonds hit single digits at their lowest in February, and again in March, when everyone expected much higher interest rates.

Readings over 90 are also extreme; The Nasdaq last had one at 91 on April 9. It took about a week, but eventually Nasdaq succumbed to such an extreme reading.

So if we break that 90 support zone on the dollar index and people see it, comment on it, get upset about it, and we take that DSI down to one digit or so, I would say we We would be near the end of the dollar’s decline (for now) and maybe even the commodity race (for now).

I think this is what is not on most radar screens.

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