Chart of the Week: Is the Dollar About to Squeeze the Shorts?
StatsEdgeTrading
TL;DR:
Both big and small speculators are leaning hard against the U.S. dollar. Every time that’s happened over the last five years, DXY has staged a sharp rebound. If history rhymes, a dollar squeeze could pour gasoline on the equity rally.
What the Chart Shows
Price: The Dollar Index (DXY) just printed a hammer candle after slicing below 97.
Positioning: Commitment of Traders data has both small (blue) and large (green) specs net-short. Commercial hedgers (red) are naturally long by definition.
Context: Similar positioning clusters in 2018, 2020, and 2022 all preceded multi-week dollar rallies.
Why It Matters
Fuel for Equities
A rising dollar during a risk-on phase often amplifies the move in large-cap U.S. stocks. The S&P already closed at new all-time highs; dollar strength could extend that momentum into Q3.Short-Squeeze Mechanics
When specs crowd to one side, even a modest bullish catalyst (think hawkish Fed tone, solid macro print, or geopolitical risk) can trigger a forced cover. That’s exactly the thrust swing traders love.Trade Alignment
Investments: Long Apple from this week’s breakout—still working.
Swings: 30+ fresh setups delivered to StatsEdgePro members today; many benefit if the dollar firms.
Day Trades: Edge remains intact regardless of DXY, but a squeeze would add tailwind.
How I’m Playing It
Trigger: A weekly close above the hammer high (~97.80) or any COT unwind of short interest.
Risk: Dollar false breakouts are messy; stops would sit under this week’s low.
Reward: A move back into the prior range (99–101) aligns with a 3-5% push in the S&P, based on past analogs.
Bottom Line:
The crowd is short the buck after a 10-point slide. That’s usually when the dollar bites back. I’m watching closely—because if DXY pops, the equity party might just be getting started.
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Enjoy the extra-long weekend (U.S. friends: mind the fireworks + beverages combo). I’ll see you Monday with the regular market rundown.