MCM Blog Special: The Dollar Has Been Unleashed

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September 29, 2021

Stocks – TDOC, ROKU, SQ, ZM, ARKK

Macro – SPY, DXY

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Stocks finished the day mixed, but the dollar was the real star of the day. The dollar index surged by more than 70 bps, climbing to 94.38. The significant damage came against the Euro, which dropped by 75 bps and finished the day at a substantial support level versus the dollar around 1.16.

The technical set-up for the Euro looks weak, with a break of support sending it to 1.14 and potentially as low as 1.11 versus the dollar. If the dollar strengthens to 1.11, you are probably looking at a dollar index trading around 98.

A dollar at that level will be like a wrecking ball for many commodities and global markets, and it will be unfriendly to many sectors of the stock market, both domestic and abroad. I would also expect it to be a negative force on oil. It won't help curb inflation in other parts of the world; unfortunately, it will make those places experience even higher inflation rates. It will be a killer for global growth.

Oil

Oil prices did get to resistance yesterday at $76.75 and have since reversed lower. There is a considerable bearish divergence for oil between the price and the RSI. Ir would indicate that oil prices have likely peaked for the time being and have a significant drop in store for them over the medium-term. I know that is not a consensus view, but I'm not a consensus type of guy.

S&P 500 (SPY)

The S&P 500 was weak all day; forget about what the chart shows. It was dead for sale all day, and if not for some big options trade around 2 PM, the chart would look a lot worse. Today was notable because the index got back to yesterday's afternoon high and could not push beyond 4,385. At this point, that region has failed four times for the index. Meanwhile, the index closed on the lows of the day. I think we are going to see support break tomorrow, setting up a re-test of 4,300.

Teladoc (TDOC)

Teladoc has officially broken its support level; my only concern with this one is that I may have been too aggressive with my $114.60 target. I went through it all in this story, which should be for free.

Roku (ROKU)

Roku is getting close to support around $290. All it needs at this point is a little nudge, and the whole thing should begin to unravel, with $230 the next stop.

Zoom (ZM)

Zoom also looks terrible, and this one may need to drop to $230 to find some support.

Square (SQ)

Square is getting crushed, too, with a break of $229 setting up a return to $200.

Ark (ARKK)

Meanwhile, all of these stocks have something in common and are part of the ARKK ETF, which looks terrible. The next level of support is $107, which will need to hold to avoid going to $98. I had noted on September 8 this thing looked like it had trouble coming its way; I guess it did. (Get the first two weeks free to try RTM - RTM Exclusive: The ARKK ETF May Sink Even Lower)

Mike

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