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Here Comes The Dollar - Morning Market Squeeze

Key Tactical Takeaways:


>  The dollar (DXY) is tickling its bearish near-term trend stop at 93.34 this morning. A close above this level would have meaningful implications for several commodities that are currently sitting on near-term support ledges. See pages 10 & 11 for details regarding GLD, GDX and UCO.


> Crude is the clearest ... right now. Pending a close ..., crude oil futures now face ... over the coming days-to-weeks.


> Rotation into risk averse sectors is clearly .... At this time, however, this development remains ... in nature.


> The VIX is officially in a near-term uptrend, meaning that daily ranges of > 1-sigma should be anticipated for the foreseeable future.


Some Quick Thoughts:


Although the waiting time often varies, the market always punishes excess speculation. The latest example can be seen in the Nasdaq Composite Index, where the 2-day decline this past Thursday and Friday was one of the largest in the past 30 years. So far, the cap-weighted S&P 500 has digested the recent excesses with a correction of just -4.3% (based on closing levels).


Simply put, seasonality ... in August. However, it is still worth noting that from now through the middle of September the S&P 500 has ... on average. When we combine this with the fact that the risk and momentum profile that preceded last week's late sell-off typically ..., we're inclined to believe that ...


While it is also constructive to see the recent sell-off being concentrated in tech names and not reaching more broadly across sectors, headlines tend to focus on the benchmark S&P 500, which has become increasingly tech-heavy. So,  the one big risk factor here remains ... Therefore, we must be on the lookout for any trigger that might cause this week's action to deteriorate from a simple range trade into a complete negative feedback loop driven by the reversal of historic levels of unprotected retail speculation. That trigger would be ...


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