DXY - A Guide For Catching Swing Trades

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A very powerful movement downards from the DXY today.

As a risk-on trader and investor, I typically look for contrary signals on the DXY to help guide my swing trades in the stock market and cryptocurrency.

It's important to note, that the DXY has been a very powerful trending index to monitor and chart, and it's trend shifts have paid dividends to those who are willing to analyze them.

In simple terms, if the DXY is in a bullish trend, then risk-on assets will be in a bearish trend. The same applies vica versa.

Of course, there is always exceptions to the rule. However, this general guideline can serve as a great bedrock for discretionary and systems traders looking to have a fundamental edge in their strategy.

Now, at first glance it may appear that DXY has had a failed breakout, and has fallen back into the yearly trading range.

While that is true, it is important to note that this recent index action forms what Smart Money Traders would call a 'change of character'. This is the moment when an asset makes a higher high or higher low, that breaks the mold of the previously established trend.

Therefore, what we can see is that recently the DXY put in a Change of Character, by making a higher high, breaking out of the previously established mold of Lower Highs and Lower Lows.

Therefore, we presume that while DXY is trending down risk-assets will do well. It does seem that today that doesn't apply, as Tuesday has been a downday for everything. I am currently unaware of the catalyst or cause of this behavior.

However, as long as DXY continues to trend down, we anticipate continued bullishness in risk-on assets.

However, let's pay very close attention to what DXY does.

Should it form a higher low, after now putting in a Change of Character, the next swing we can expect would be a Higher High.

Thus, we could tentatively anticipate a week or two of continued bullishness, followed by a Higher Low on the DXY, followed by a sharp correction in risk-on assets.

Trade safely, and as always - let analysis and data guide your trading decisions - never emotion.