Will a sharp drop in the US$ have a negative influence on the S&P500? In theory, macroeconomics 101 says that large exporters will gain from a cheaper currency.
If we look at the correlation between the S&P500 and the US$ index level for the past five years, such a correlation is hard to find: between July 2014 and April 2015, the US$ index gained 20 points with a strong S&P500, while since the start of 2017, the US$ index dropped by almost 10 points while the S&P500 also gained.
Hence, the S&P500 gains are probably more related to international QE activity (availability of liquidity in any currency) then about what country is printing faster (Relative liquidity availability in different currencies.)
For now, we can only state that large investors are rather worried regarding the S&P500 high valuations level in the context of great US political uncertainty.
Even both the NQ8 and the small caps look fragile here
The Futures show similar weakness:
One of the only sector that looks like attracting some dip buying is the Energy.
Conclusions:
Still looking at shorting the small caps in strength, but the Money Flow does not signal that strength is on teh way.
