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US$ looks to be a "confirming" indicator

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In today's market monitor, I noted that the Dow Industrials (INDU) 9,244 +1.35% looked to be making a bullish break to a new session high at the 9,200 level and we were monitoring the US$ closely. Unfortunately, my US$ chart is 30-minute delay, while all of my stock charts and index charts of equities are real time.

However, I'm now under the opinion based on observation that the US$ looks to be a "lagging indicator" as it relates to stocks, but can still be correlated against stock price action by traders looking for CONFIRMATION of a move (up or down). Here's what I'm noticing based on 5-minute chart intervals where we can compare time.

US Dollar Index Chart - 5-minute interval (30-min. delayed)

The 30-minute delayed chart of the US Dollar Index (dx00y) shows a nice little bullish break from a wedge pattern on the 5-minute interval at 02:00 PM EST. That looks to be a "confirming" move in what was seen in the Dow Industrials (INDU) when it broke to a session high. (Black box in above chart was set at the 02:00 interval)

Dow Industrials Chart - 5-minute interval

I've also set my cursor tracking at the 02:00 EST bar on the 5- minute chart of the Dow Industrials (INDU) right where the Dow broke to a session high. The reason I say the US$ is a "lagging" yet CONFIRMING indicator is that while the Dow breaks to a new session high at 02:00, the US$ Index is just breaking out of a wedge, but nowhere near its session high of 107.03 set earlier this morning.

However, bulls for the Dow Industrials (INDU) may now be targeting a relative high of 9,400 as their target ($94.00 for the Dow Diamonds (DIA)) and then looking for some bullish CONFIRMATION from a strengthening US$ Index (dx00y).

I'm looking into what it would take to get a "real time" quote of the US$ from q-charts so that I can eliminate this 30-minute lag from the delayed quote.

Regardless, I think the above observations, delayed, lagging or otherwise can be key for shorter-term index option traders.

For instance, if you're in a profitable trade, but it just seems to be "stalling out" then look for any type of "confirmation" from the US$ in the direction of your trade. If you're not seeing the confirmation, then perhaps an early exit from the trade might be taken instead of risking potential gains if no confirmation is being found.

Jeff Bailey
Senior Market Technician
Option Investor

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