The US Dollar trend is a bit confusing at the moment.

Thursday - Commodities, Currencies

What is the spreadsheet shown below telling us?

The first thing I always look for in this spreadsheet is how the US Dollar is doing because it has so much influence on commodities, commodity-related stocks and emerging market stocks.

At the moment, the US Dollar looks weak, but not as week as it was last year. Dollar weakness favors commodities, so I think this means the dollar still favors higher commodity prices and commodity-related stocks, but just not as much as it did last year.

Another thing I look for is a strong Euro, because a strong Euro also favors commodities. But, at the moment, the Euro is weak so that works against commodity prices.

In other words, it is a bit murky at the moment. Maybe the charts can tell us more.

The chart below shows that earlier this week it looked like the dollar would start to grind higher again. But now, after the Fed statements have been read and parsed, the dollar is falling again.

Trying to figure out which way the dollar is headed is really difficult sometimes. At least, it is for me. So I am going to just let the indicators decide for me.

Since the relative strength score is weak, I am going to assume the dollar will be weak until the score strengthens.

Below is the overlay chart of the Euro and commodities in case you were doubtful of the positive correlation. I see that in 2017 so far, commodities are a bit stronger than the Euro, which means that at some point either commodities weaken and/or the Euro strengthens.

Emerging markets are breaking out, but it would be nice to see the relative strength breaking to new highs as well. Like I said, murky.

The Short-Term Trend

It is a resilient market, bla bla. The bears are finding energy interesting at the moment. After just a few up days, energy stocks turned down again, and the trend looks lower.

Sectors

Below is the spreadsheet in which I try to determine the out-performing sectors. I use it to keep myself in the best areas of the market.

Philippe left a comment yesterday asking how I rank these ETFs. For the most part, I use the relative strength scores from etfscreen.com. But I also add a filter to narrow down the number of ETFs a bit, and to try and prevent whipsaws above and below the SPY.

For instance, one filter I use is whether relative strength is leading or trailing prices. I like to see relative strength leading, or, at least, keeping pace with price. In this regard, I changed the symbol to red for the two ETFs in which the relative strength trend is starting to trail price.

EEM has been strong lately, but it hasn't been strong enough compared to SPY. 

For some reason I have an attachment to health care stocks, so I am always looking at the XLV chart for any signs that it is breaking out.

The current chart is intriguing, although it looks a lot like the breakout in July that then failed in October. The relative strength shows a little early potential, maybe? But it isn't enough to convince me to sell a better performing sector in order to buy this one.

The other day, AJ left a comment that XLP has looked strong lately. The price action definitely looks good, but the relative strength is still weak.

I am not sure how to reconcile this. I missed this good move because I focus so much on relative strength which isn't too inspiring for XLP.

My guess is that both XLV and XLP are catch up trades at the moment, and I have never done well with catch up trades. When I try to play catch up, I am usually looking at a chart that has already made its move and people are getting ready to sell for a quick profit. So I get in too late or hold too long and take a loss.

I do much better when I stick with the out performers.

Follow Up

The long-term outlook is positive. 
The medium-term trend is up.
The short-term trend is up.

The consensus point-of-view is "bullish long-term, cautious short-term". The consensus seems to be working in favor of stock prices at the moment.. but from a contrarian point-of-view.