If the dollar breaks down we would expect to see the broad market advance to accelerate noticeably, breaking it out to clear new all-time highs, probably leading to a parabolic ramp into the traditional “sell in May and go away” time. However, if the H&S top in the dollar aborts, which COTs suggest is very possible, then we may be the top in the broad market right now and various sentiment indicators indicate that a top is close at hand.
So how does the broad market S&P500 index chart look right now? On its 15-year chart we can see that after climbing a wall of worry for several years it is now arriving at very strong resistance approaching and at its 2000 and 2007 highs, and psychology is shifting with market participants heading in the direction of euphoria. A Triple Top reversal here would be a highly satisfactory technical development, although we must bear in mind that in real terms, stock values are way below what they were in 2000, once we factor in inflation during the intervening years. Also, regardless of the state of the economy, money spirited into existence by the Fed could drive markets considerably higher.