By J.C. Parets & All Star Charts
1/ US Dollar Index Posts 52-Week Low
2/ Is Energy Next in the Rotation?
3/ Vietnam Hits New Highs
4/ It’s Time to Can the Corn
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1/ US Dollar Index Posts 52-Week Low
The U.S. Dollar Index (DXY) has taken a less direct route, meandering sideways for the past seven months. That changed during today’s session as the dollar slid to fresh 52-week lows.
And thanks to sellers taking control of the market, today’s session is offering another critical piece of confirming evidence—an oversold reading on the 14-day relative strength index (RSI).
Notice that DXY never registered an RSI print below 30, even during the strong selloff last fall.
Today’s oversold reading marks a significant shift in momentum, favoring dollar bears and continued USD weakness.
More importantly for the broader market, a weaker dollar could act as a catalyst for the next leg higher in risk assets.
Stocks worldwide have enjoyed a consistent bid over the past six months while the dollar has gone nowhere. Imagine how stocks might react if the dollar continues falling.
2/ Is Energy Next in the Rotation?
A healthy sector rotation continues to pump fresh life into the bull market.
The chart below shows energy (XLE) relative to tech (XLK) and industrials (XLI) relative to tech challenging a critical level of former lows.
If XLE and XLI are going to embark on a new period of outperformance, this would be a very logical place for it to start.
Industrials are already experiencing a relative bid. It shows in the absolute trend, as XLI recently posted a new all-time high.
If this bull market has legs, we could see energy also begin to outperform tech during the second half of the year.
3/ Vietnam Hits New Highs
Whether one trades international equities or not, it’s downright irresponsible to ignore the strength overseas.
In fact, when we look at international indexes, stocks in many different countries are resolving to the upside.
Vietnam is considered a frontier market, suggesting amplified risks that extend beyond the risk-fueled emerging markets.
Regardless, investors are bidding up these highly risky stocks.
As you can see, the index is printing fresh nine-month highs as it completes a bearish-to-bullish reversal pattern.
Witnessing Vietnam embark on a new uptrend speaks to risk-seeking behavior, making it difficult to maintain a bearish outlook for global equities.
4/ It’s Time to Can the Corn
Corn futures are falling fast.
It’s an excellent example of the extreme directional moves common among commodity contracts, especially grain markets this time of year.
In the process, corn has completed a multi-year topping formation.
Corn futures are undercutting key pivot lows, reaching levels not seen since January 2021.
Based on today’s breakdown amid a prolonged bearish momentum regime, corn futures could revisit their former 2018 highs.
Perhaps these potential lower prices will translate to cheaper grocery bills as today’s Consumer Price Index (CPI) print points to easing inflationary pressures.
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Originally posted 12th July 2023
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