The US Dollar and the S&P 500 have been highly correlated this year. Whether it be because of the increased foreign investment in US stocks or because of the increasing correlation between all financial assets, the following chart shows how closely the USD and the S&P 500 have been moving together. I have set back the S&P 500 back eight trading days. The R-Squared is .65 (i.e. the USD price explains 65% of the movement in the S&P 500) which a statistician would scoff at, but which a trader would bet on. If you're bearish, the USD has taken a nosedive in the past five trading days, implying that the S&P 500 could do the same next week.
I mentioned in the past that when the shorter term DeMark Sequential (TM) indicators don't work, you should switch to a longer timeframe. Well, the NDX could hit a DeMark Sequential (TM) 9 sell signal in the next two weeks. So the strong seasonal trends might very well hold up the indexes for the remainder of the year. I'm not that interested in selling everything I own. However, I have hedged some of my long exposure in the event that the beginning of next year becomes a bit more rocky.
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