Recently we have been looking at the dollar for trading signals on several other asset classes. That is not particularly distinctive; a number of analysts have been looking at the same inter-market relationships and drawing similar conclusions.
While having a fairly strong conviction in this trading theme, I wanted to have more data to get a better idea of what is happening here. Jeff Miller posted a piece in which he provides us near and longer term correlation data between the US Dollar and the S&P 500, along with some very helpful charts.
Building on his work, I have put together a set of Pearson r data to show the correlation between the US Dollar and stocks,US Treasury bonds, commodities, and gold. A couple of notes on methodology: I have taken weekly closing values for data points, and used the following ETFs as proxies for the various assets:
Dollar – UUP
Stocks – SPY
Treasuries – IEF
Commodities – DBC
Gold – GLD
To the extent that the EFTs have any tracking error vs. the underlying indexes, there will be some imprecision, but this should be fairly immaterial.
We also look at a number of time periods, trying to capture bull phases, bear phases, and more complete market cycles. For my part, I have drawn some preliminary interpretations based on this study, but rather than commenting here, have opted to present only the data, and invite the reader to arrive at his/her own conclusions. Comments, as always, are welcome.
Please click on the following link to open the data table: ETF Pearson r