Crowd Sentiment Index (CSI) for US Equities, Oct 14 - 31% (Up 11)

[asomani]

This week's report is attached.

Feedback and comments are always welcome and appreciated.

[ericoleman]

Great stuff as usual, Aly. Thanks always for sharing.

[asomani]

Great stuff as usual, Aly. Thanks always for sharing.

You're welcome, Eric.

I'm happy to give back something to a community I've learned so much from, including from a talent like yourself.

[asomani]

Some more inter-market analysis:
I have come to the opinion that what may hold the kicker to whether US stocks are really in a new cyclical bear market or a continuing cyclical bull market is the US Dollar Index.

For reasons I pointed to in this weekend's CSI report, long-term treasuries appear ripe for a continued substantial move lower (which should result in the opposite for US stocks), if only the US Dollar Index will comply. What do I mean by 'comply' ?

The US Dollar Index may be testing a crucial area of support soon: the top of a multi-month base it broke out of in Sept. - which it should not move back into if it is indeed ready for another leg higher - as well as the near confluence of the 50- and 200-day moving averages.

Bulls require a breakdown below this (apparently) strong area of support to substantially strengthen their case, in my humble opinion (which we can call "the inflationary case"). In other words, this is another battle of inflationary vs. deflationary forces (once again). After all, an eventual new leg higher in the US Dollar Index (whether late this year or early next year) will more than likely lead to a new leg down in the US stock market (as well as at least a buoyant market for US treasuries).



If we do see a breakdown in the US Dollar Index below such a strong area of support, a possible reason for such a dramatic reversal could be tied to the suspicious and substantial jump in M2 over the summer that has been continuing unabated to this day (see attached excerpts of Aug. 30th commentary from Salida Capital's website to get a better idea of what I mean). If the jump indeed reflects reflationary efforts, it is only a matter of time before the US Dollar Index reflects this. Interestingly, the jump in M2 was also mentioned by famed long-term investor Jim Rogers a week ago (see here, near end).

But, first thing's first: let's see how the US Dollar Index handles itself going forward. If US stocks are going to rollover for another leg down sometime within the next say 10 weeks, I would expect the US Dollar Index to at least continue to hold above its crucial area of support, and not definitively break below it.