Here is a daily chart of the US dollar over the last six months or so, as you can see the dollar is taking a beating on inflation fears among other things. Remember the market is working inverse to the dollar right now so we need to pay extra close attention to how this pattern will play out because it may tell us the next move the stock market will go in.
Just in case you missed it previous post of intermarket relationships:
One of the main driving factors of this whole rally off the March lows has been the devaluation
of the US dollar. Key areas to watch: Horizontal Support coming in @ approximately 78.50 and the upper edge resistance line which it is closing in on. If we get a break to the upside a possible move to 85 would not be out of the question and the stock market would probably correct as well. If we go back down and break support, well oh boy more downside would be inevitable. Which however would more than likely cause the market to continue to rally.
I do want to say this rally still has plenty of more room to the upside, I hear people say so many up days in a row market so overextended. Well in a way their right but do not forget we dropped over 50% over the fall/winter alone so this is an unusual time and that a rally over the 1000's on the SPX would not be out of the question. Each and every chart I look at still shows more upside that is possible. Again though keep an eye on the dollar (DXY) intraday for clues on which way this may turn.