In this post from July 27th we highlighted the likelihood of an oversold countertrend bounce in the U.S. Dollar Index (DXY) given the initial extreme oversold condition using the our trusty 14-week stochastic indicator (Figure from note below).  Of the three prior occurrences, the countertrend bounce was short-lived and ranged between 1-4%.  We continue to believe that any bounce should be sold and would continue to focus new money on the economically sensitive areas given an ultra-easy Fed, historic excess liquidity, and a synchronized turn off the bottom in the global economy.

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