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Technical Analysis of DXY and S&P 500

Will the dollar growth index help the S&P500? Today, we look at technical analysis of the DXY dollar index and the S&P500.

DXY

The DXY has been declining for a long time until it finally sank to the bottom where it formed a triangle formation. DXY represents the strength of the US dollar. In general, we can say that as DXY rises, the dollar strengthens and classic markets, led by stocks and indices, fall. This rule has, of course, needs to be taken with a grain of salt as it does not apply to every single case.

We are currently in a situation where DXY attacks the upper limit of the triangle, but there it created another triangle.

Technical analysis of DXY daily chart Figure 1: Technical analysis of DXY on D1 chart

4H chart DXY

We can see better in this chart that DXY created a wedge. So now, the question remains whether the collapse will come and if so, when it will happen. If a slump would come, it could again help the index, led by the S&P 500. However, if the price would overcome the trend on the daily chart and go up, it could mean problems for the indices.

Technical analysis of DXY on a 4H chart Figure 2: Technical analysis of DXY on a 4H chart

S&P 500

In previous analyzes, I have already said that the S&P 500 is moving in the channel. This channel still seems unshaken, but it is a bearish channel and will not remain unshaken forever. However, the lower trend is still holding. As long as the S&P 500 stays in this channel, growth will continue. If you notice, it is still the same scenario. Whenever a quick decline on a trend line occurs a quick pull from there usually follows shortly after.

This index always miraculously rebounds and then seems to be bullish. The continuously growing price of DXY could lead to problems causing the price to fall downwards through the trend line.

Techical analysis of SP500 Figure 3: Technical analysis of SP500

Conclusion

The indices are already quite upset. Dow Jones is even worse, as it is already showing signs of weakness. Growing DXY and similar patterns on the indices indicate a possible risk we should brace ourselves for.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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