Cycle Trading

Summary

• The dollar is testing a critical 15-year trend line.
• This level represents a major long-term decision point.
• A rejection would reinforce the broader dollar downtrend and ease financial conditions.
• Dollar weakness could act as a catalyst for a breakout and potential melt-up in stocks.

The dollar has been steadily climbing along a major 15-year trend line — a level that carries significant macro importance.

Long-term trend lines of this magnitude often act as major inflection points. A sustained breakout above the trend line would signal structural dollar strength, tightening global liquidity and creating a more challenging environment for risk assets.

However, the more consequential scenario may be a rejection.

If the dollar fails at this level, it would reinforce the broader downtrend and suggest the recent strength was corrective rather than structural. Dollar weakness tends to ease financial conditions, support global liquidity, and create a more favorable backdrop for equities and other risk-sensitive assets.

This is where the setup becomes particularly important for stocks.

The equity market has spent months consolidating just below the 7000 resistance level. If the dollar rolls over from long-term resistance, that shift in the liquidity backdrop could provide the fuel needed for a breakout. After extended consolidation, major resistance breaks can lead to faster-than-expected upside acceleration.

In other words, the dollar may be approaching a level that determines whether markets remain range-bound… or transition into a stronger risk-on phase.

For now, this remains a setup, not a signal. The key is how the dollar reacts at this trend line. A rejection would favor a more supportive environment for risk assets, while a sustained breakout higher would shift conditions toward tighter liquidity and increased cycle risk.

Takeaway

The dollar is approaching a major long-term inflection that could set the tone across markets — a rejection would increase the probability of a risk-on breakout in stocks, while a breakout higher would shift the environment toward tighter conditions and elevated downside risk.

Subscribers are receiving detailed multi-timeframe cycle analysis on the Dollar, Stocks, Gold, Miners, Oil, and Bonds — including the specific daily, weekly, and monthly signals that will confirm which scenario is unfolding.