We started looking at the upward trend in the dollar months ago, having highlighted a clear rising channel in the DXY. The DXY has gone on to make new highs, putting the brakes on any sustained rally in metals for now (note that metals are also not breaking down). That said, the flashing divergence between DXY and its RSI on the weekly timeframe continues to widen. This setup suggests a top is continuing to form in the index.
Although we had the intraday move in stocks wrong on Friday (we had suggested that a retrace higher was probable for Friday intraday), before Powell delivered his short, concise hawkish message, we did reinforce our belief that any intraday move would result in a lower high and that stocks would ultimately head lower. Below is a look at stocks on the weekly timeframe showing Stochastic RSI turning down, with the bottom range of the Bollinger bands and the 200-week moving average looming below.
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