MAY 16 T3

1) US Dollar
2) Rates
3) VIX

Episode Transcript

Speaker 1 (00:00):
Now here's your care for my wealth guy, Chris Kleine,
Good morning, is welcome to another edition of Important three things,
or at least what's important to me? Number one the
US dollar. Number two interest rates. You know that sounds
like a exciting topic, right, but what you learn from
the dollar and from the rates markets on a macro

(00:23):
level are super valuable to help you figure out how
to position things. And lastly, number three volatility, So regarding
the US dollar, was the breakdown in the US Dollar index,
which by the way, assembled dxy. Was that a headfake?
Or is this little rally that we've seen since the
local low from April to twenty First, just your garden
variety retest to lower highs before we see another leg

(00:46):
lower in the dollar. Remember, retests are super common after
big moves, and the dollar has had a pretty big
move down over the last several months. So what's likely. Look,
I think what we're in is the early stages, the
earth innings of a new week dollar cycle. But what
are the probabilities. The probabilities are that we see an

(01:07):
intermediate term excuse me, an immediate, very quick like within
less than a month, an immediate term move toward a
lower high at one oh two fifty on the DXY
that's the Dollar index and fail. But what are the possibilities. Well,
the possibility is that we see an intermediate term move
towards one oh four fifty and fail. But and this

(01:29):
is an important butt because it's also possible if the
DXY index, the Dollar index rips through that zone with strength,
I'm going to have to revisit and rethink the whole
week dollar theme. I don't see that happening. There's a
lot of things happening globally, especially when you look at
foreign currencies. I mean, more and more of them are
reversing the trend against the dollar with every day. And

(01:52):
it doesn't matter where you look regarding global currencies. You
can look at the Philippines, Brazil, Sweden, Mexico, pick a country. Right,
US dollar is getting hit against all these other currencies
across the world. Currently, there's a positive correlation with the
dollar and the S and P five hundred and bitcoin,
which means a rising dollar is a tailwind for those

(02:13):
particular assets as the dollar moves higher. Right, We're just
going to have to see how these correlations play out
near those potential reversal zones that I just mentioned for
the dollar, because it could have a very impactful relevance
to stocks and bitcoin. We'll see how it goes. What's
the interest rate market telling us, well, despite the little

(02:34):
correction that we're seeing in yields this morning, and that
when I say yields, I mean the two year, the
ten year, twenty thirty year durations across the curve. Not
only is the US Treasury tenure yield signaling bullish trend,
which again is bears for bond prices, so is the
ten year bond in Japan, Germany and the UK. Right
now in the United States, we're seeing growth and inflation

(02:56):
accelerating at the same time here in June, with a
rate of change of CPI finally arresting its recent decline.
Now there's a much much better way to look at
CPI than the Fed's distribution of this data, and you
can get it from Trueflation tru FLA TiO N. So

(03:17):
just go to trueflation dot com and you'll find what
I'm talking about. And if you look at this morning's
graph on the very bottom right part of the chart,
you can see that inflation is in fact reaccelerating, and
you can see it in real time. It's important because
when you start to consider that the FED is acting
on a one month lag, because that's the CPI data

(03:38):
that they always put out, people start to wonder why
the FED is usually late. Well, they're looking at lagging data,
and it's that's insanity in today's marketplace. I don't know
why they feel necessary to do that. So the reacceleration
that we're witnessing in CPI, specifically as it relates to

(03:59):
a more real time inflation gauge like what we get
from trueflation, is likely what will cause interest rates at
the longer durations to stay bullish trend. And if we've
got a bullish trend in yields, we have a bearish
trend or a bearish move in prices. So we just
have to consider how that could potentially impact your decision

(04:19):
making with regards to owning a lot of bonds. And
why do I say that, Because there are a ton
of people who are scared to death of the US
stock market right now or any asset that they deem
as quote risky, and so a lot of people have
piled huge portions of their portfolios into various forms of
bonds at a time in which the bond market is
not likely to find itself in a great spot here

(04:42):
in the near term. Now, does that mean it's going
to do terrible No, not necessarily, but realistically speaking, if
you're looking to create gains or make money, bond market's
probably not the place for the near term, and maybe
not even the intermediate term. We're going to have to see,
all right, how about volatility. Well, there's a huge monthly
US equity options expiration this morning, and that's going to

(05:04):
see about one point two trillion dollars of the one
point seven trillion dollars notional expiring actually on the open
this morning, and so we've got to keep that in mind,
and we have to consider how that could affect a
suppression of price during that timeframe. VIX VIX is still
signaling lower lows with significantly lower highs in the signal

(05:25):
as well. And remember when I say signal, it's simply
the rate of change of price, volume and volatility of
the thing that I'm tracking. And in this case, IX,
the top end of today's trade range is now down
to twenty point two to eight, with the low end
at fifteen point two. That's a lower low and a
lower high. Now there is some headline risk out there
as the US administration is currently negotiating a nuclear deal

(05:47):
with the RAN and of course we've heard that there's
a threat of force on the table if we don't
get a good deal. So what might that do. I
don't know. Maybe traders decide to buy some protection going
into the weekend on that news and that causes VIX
to move higher. Does a move higher impend doom for
the US stock market? No. Any spike that we get

(06:10):
out of the VIX right now has to first get
through the top end of the trade range, which is
twenty point twenty eight, and a spike up to twenty
five is likely all we would see because that is
intermediate term trade resistance, and it's a very heavy resistance
level that is oftentimes very hard for elements to get through.

(06:32):
A move towards twenty one on VIX would correlate to
about fifty seven to fifty on the S and P
five hundred, and would I think be a by opportunity. Yesterday,
the index the S and P five hundred that is
actually closed above its longer term trend line, which is
bullish for the first time since February twenty seventh. That's
the last time it broke down below that trend level,

(06:54):
and that's when it became a bearish condition or a
condition in which you'd say, I should probably do something
to protect myself a little bit here. When we get
bearish breakdowns through trend, you protect. When you get bullish
breakouts above trend, you go risk on. And right now
the contrarian viewpoint is risk one because everybody is very bearish,
very risk off. And we'll get sentiment readings a little

(07:16):
bit later today, so we'll see what happens with that. Anyway,
hope you have an amazing weekend. Thanks so much for
so much for tuning in. I hope it's enjoyable and
you've enjoyed this past week of information. If you'd like
to find out more, just reach out to me. That's
Chris Klin at carefromiwelf dot com or email info at
carefrom my wolf dot com or the old fashioned way
eight six six five nine six ninety eight eighty six.

(07:39):
Thanks for so much for your time. God bless have
a beautiful day