SPX & U.S. Dollar divergance

[limitdown]

Quote from indahook:

Now I have read John Murphy`s "intermarket technical analysis" and (for those who havent read it) the reverberating theme is...when two markets that normally move in conjunction diverge major moves are afoot. What do you guys/gals think? Since 4/22 the dollar and SPX have been like a two magnets of the same polarity. Something has to break!

Pairs Trading relies upon divergence, and captilizing upon this spread...

whether or not there's a spread setting up is not the point,

noticing that the world markets are no longer supporting the US markets is the point, and is omminous...

 

[Kicking]

The February issue of Futures mag has an article on intermarket analysis: "Trade a sympathetic market, get sympathy" the author tries to make the point that historical relationships betwen markets don't always hold. Good to know. I too thought that euro couldn't break out with the US market, that was a mistake of course. Now is the rise of the euro telling us of something we don't know yet? maybe but meanwhile best bet has been long euro and long Nasdaq futures or Q's.

 

[indahook]

Quote from limitdown:



Pairs Trading relies upon divergence, and captilizing upon this spread...

whether or not there's a spread setting up is not the point,

noticing that the world markets are no longer supporting the US markets is the point, and is omminous...

I wouldnt even know how to profit from this scenario nor have I ever employed the strategy of pairs trading.

 

[Jayford]

Quote from indahook:

Now I have read John Murphy`s "intermarket technical analysis" and (for those who havent read it) the reverberating theme is...when two markets that normally move in conjunction diverge major moves are afoot. What do you guys/gals think? Since 4/22 the dollar and SPX have been like a two magnets of the same polarity. Something has to break!

It has changed, and will prolly be divergent for some time. There are fundamentals attached to this concept, but they change all the time. Read anything from a book with a grain of salt. Short term, its dubious.