Something Is Not Right

Dollar Index – DXY

DXY continues to increase the bullish odds.

The daily candles just formed a Rising 3 Methods on 8 candles after Three White Soldiers. The weekly trend is flipping bullish. The 15D candles formed a Bullish Engulfing and the monthly candles can repeat the 15D combo, elevating the bullish odds even more.

The long term chart which is 25 month old remains intact. Some technicals project a new high ($115 or more) in a few months.

DXY is very bullish, but not as bullish as Yield.

Baltic Dry Index

The BDI is often viewed as a leading indicator of economic activity because changes in the index reflect supply and demand for important materials used in manufacturing. In the majority of cases, the index is well correlated with the Market moves and is considered the canary in the coal mine for overall health of the markets.

Today BDI hit the third lowest level ever recorded, 541, and does not look like it is ready for a reversal.

From the Elliott Wave perspective, the ongoing BDI wave would typically terminate somewhere between 700 and 60. There is still some room.

Dow Jones

I analyzed SPX, NQ, RUT and DJIA and only Dow Jones has a very strong candle pattern that can be used as a base for further projections.

Since the middle of December, DJIA has been forming a very complex corrective wave. Now it shapes up and is best viewed on the 3D chart. The index is possibly setting up for a Falling 3 Methods (blue oval) after Bearish Engulfing (BE).
The wave looks perfectly symmetrical so far (red oval). Note six 3D candles before BE and already 6 candles after BE. The seventh candle closes on Friday and it feels perfectly right to stay in cash, as David’s Live Trading System says.

There are two most probable paths.

Red: the correction ended in September, the ongoing wave is wave 2 with the target of $32k, or a loss of 7%.

Blue: wave iii of C is about to start. Possible target area for C – $29600-28000, or a 14-18% decline.

In both cases, the next wave is expected down, whether it is wave c of 2 or wave iii of C, and will be substantial and aggressive.

SUMMARY

It does not feel right when Yield, Dollar Index, and Stock Market are going in the same direction. Something has to give, and I suspect it will be Stock Market which is represented by Dow Jones in my little analysis.

US10Y and DXY are very bullish and are very unlikely to change in the coming weeks and possibly months. The BDI, a harbinger, is bearish with higher chances to find an All Time Low. The Stock Market does not seem to have any chances to continue upwards in such good company.

Be prepared.

Good Luck!