SPX * (DXY/100) what does that mean? DXY is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies (thanks wikipedia). Turns out that when things are going along normal and the dollar is not too strong or weak the value is around 100. DXY/100 gives us a scaling factor that says 1.0 is around normal. What I simply did was multiply that times that SPX. The SPX is plotted as a the line and the ratio is the candles.
So my general theory is that as the Fed purposely devalues the dollar by printing it nonstop since March and flooding the market the SPX has risen a lot more than it seems like it should. This gives an artificial inflation to asset prices which you can see as the difference between the actual and the scaled. This has the compounded effect of drawing more investors into the market and creating a positive feedback loop to pump up prices more.
In this chart you can see the actual DXY. It looks to be reaching a low based on history. So, will the market rally come to an end, or will FOMO investors take over and push it higher?
Very useful perspective, that has def been a big contributor. DXY spiking has long been a potential crash catalyst as well.
The SPY*DXY/100 held it's March ATH until YESTERDAY and today is first ATH close, pretty crazy, great timing!
darkmode
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more TINA than FOMO in my opinion. Whoever has savings in dollars can see them being worth less every day. They are effectively FORCED into entering the markets even if they don't want to. And holders of dollars are many, from a lot more countries other than the US . Generally Asia, the GCC and countries with dollar pegged currencies.
kishnara
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@Dr_Roboto, Just not FED, ECB, JCB all pumped money. $17 trillion was pumped by CB all over the place in the last 9 months.
The SPY*DXY/100 held it's March ATH until YESTERDAY and today is first ATH close, pretty crazy, great timing!