DXY and US10Y Divergence indicating SPX correction

2019年9月1日

The 10Y yield has been falling since it peaked on the 5th of October and 8th of November 2018. On each leg down of the US10Y, ie; from the 8th of November till the 3rd of December 2018, from the 17th of April till the 3rd of June 2019 and from the 29th of July to the 8th of August 2019, the SPX has also correspondingly fallen.

However, the DXY, which has been fairly steady, has started rising from the 18th of July. The DXY spiked on the 31st of July and that rise corresponds exactly with the drop of the SPX off ATH and also the sharp leg-down of the US10Y on the 31st of July.

The Divergence between the DXY and US10Y is much wider at present than what it was when the SPX fell straight of the top from 3020 on the 31st of July.

Also, another observation is that on the 30th of August, the DXY began to explode upwards. (DXY rising usually corresponds to a falling SPX). I think this sudden rise in the DXY is going to continue, and with it, the SPX will fall. The US10Y is already at 52 year record lows and I dont think it will fall much further; but as the DXY/US10Y Divergence increases, so will there be continued pressure on the SPX to correct downwards.

I have set the chart Indexed to 100 in order to normalise the 3 curves.