DOLLAR INDEX

DOLLAR INDEX
Today short covering was seen in DOLLAR INDEX and the future direction of the world wide equity markets will depend on this index. The DOLLAR INDEX is inversely related to the equity markets ( dollar up then equities down and vice versa).
Today the index after falling down considerably has rebounded and now the following scenarios can be considered.
1> This is a dead cat bounce and bears will short the dollar once again .This idea will be invalid if $ index closes above 77 which is a significant resistance. A close above 77 will lead to short covering in $ index and long unwinding in equities.
2> The $ index is in process of bottom formation if this is true the index will consolidate in the next few days and will provide signals such as high volumes and +ve divergences on indicators.
Right now the index is UP and DOW is flat instead of being down which means equity traders are right now treating the bounce in $ index as dead cat bounce.

However equity long traders need to be careful if and when $ index closes above 77.