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Dollar's gain has futures higher

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The first upside alert from my trading station this morning has the U.S. Dollar Index (dx00y) 108.53 +1.18% clearing the 108.50 level which we thought might be a key upside level for traders to be monitoring and this level has been reached in the early going. This may be a sign that foreign investors are beginning to commit more capital to US-based assets a five-month hiatus.

US Dollar Index Chart - Daily Interval

The US Dollar Index (dx00y) is showing strong gains this morning and trading at a multi-week high. This action hints that capital is returning to the US and may help to bolster stocks. In recent weeks however, the bulk of capital coming back to the US has been placed in Treasuries and has driven YIELDS lower.

This morning, we are seeing some rather strong selling in Treasuries as YIELDS are higher across the board. The shorter- term 5-year Treasury YIELD ($FVX.X) 3.212% is rising from yesterday's close of 3.194%, which was a multi year low YIELD close. A near-term level of resistance YIELD for traders to monitor for further weakness as it relates to price would be the 3.3% YIELD level here.

The benchmark 10-year YIELD ($TNX.X) 4.301% is also seeing some selling from yesterday's closing YIELD of 4.238%. Key level of near-term YIELD resistance here is 4.6%, which is the July 30-31 relative YIELD highs.

One reason we are seeing some selling in Treasuries this morning is the Treasury will be holding Treasury auctions and bringing some supply to market.

The strengthening dollar and some near-term selling in treasuries looks to have a positive impact on this morning's stock equity futures and could lead to a solid day for bullish equity traders. S&P futures are currently trading higher by 13 points at 847, NASDAQ futures are higher by 14.50 points at 879.50 and Dow futures are up 128 points at 8,165.

Fair value for the S&P 500 today is $0.68. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.72 and set for program selling at $-1.84. Fair value for the NASDAQ-100 today is $2.40.

Jeff Bailey
Senior Market Technician
Option Investor

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