Dollar downturn along with Energy points to coming relief for risk assets

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Short-term rallies look likely for US Equities along with most of Europe and Far East Equities after the initial pullback over the last couple of weeks. However, given that many indices have the same near-term wave structure, it’s thought that bounces into late March would prove to be selling opportunities for an additional decline, which could take place into April expiration. The US Dollar might start to diverge with TNX on a short-term basis, as there looks to be a coming selloff approaching for DXY, while most Energy stocks also look fatigued and might require consolidation. The combination of our recent reflation trade pulling back could be a temporary good sign for the outlook for Equities in the short run, and my expectation is for a 150-200 point S&P rally, which might carry SPX to near late February highs near 6950.  However, it’s hard to say with confidence that the selling pressure that started last month has run its course, and I’m increasingly expecting that another wave lower could be possible into April. Overall, the short-term path for Equities looks favorable over the next week, but I’m not expecting a push back to new highs in the near future.

If the near-term pattern analysis of many global indices is any gauge for how U.S. equities might act over the next month, I expect that there still could be lots of volatility and a trading-type environment that favors being opportunistic vs. a buy-and-hold between now and late April.

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