While Monday’s (3/16) action saw the U.S. Dollar pullback ahead of a number of central banks global meeting this week, it follows Friday’s (3/13) rally to the Dollar’s highest level since May 2025. The move above $100.50 for the ICE U.S. Dollar Spot Index (DX/Y) brought the chart back to a buy signal for the first time since January 2025 with a triple top buy. The recent rally, driven in the near-term by geopolitical tensions in the middle east that began in February, comes after the dollar had fallen to $96 in January, the currency’s lowest level since early 2022.

The default 0.50 point per box chart returning to a buy signal is a silver lining in what has generally been a bleak picture for the greenback for the prior 12+ months, but the index still maintains a long-term negative trend, trading below the bearish resistance line. Both the default chart and long-term 1 point per box chart highlight the $100 level being an inflection point, having been resistance since July last year and support prior to that from July 2023.

Weekly momentum has been positive for three weeks now, suggesting the potential for higher prices to continue for at least 3 to 5 more weeks on average. Moving forward, investors will watch to see if the Dollar can build on its recent rally to return the long-term 1 point per box chart a buy signal, which would occur with a move above $101.  For both the default 0.50 point per box chart and long-term 1 point per box chart, a move to range would change the long the mid-$100 range for the bearish resistance line to be penetrated and the long-term trend to return back to positive.

While investors will watch for further developments on the trend front, it is worth noting the near-term developments for greenback-related funds on the relative front. The peer relative strength chart comparing the Invesco DB U.S. Dollar Index Bullish Fund (UUP) versus the NDW Foreign Currency Index (DWAFXI) on a 2% scale reversed back into Xs following Thursday’s (3/12) action after having been in a column of Os since December 2025. The long-term relative strength still favors the foreign currency index, highlighting the need for further long-term technical developments for the U.S. Dollar to overtake foreign currencies. Apart from the near-term rise relative to its peers, UUP continues to be weak on a near and long-term basis versus other risk-on asset classes. Though still weak from a relative standpoint for the time being, further improvement could lead to further potential gains in relative strength.

A common question we get from clients is if momentum has been doing well, then should I look to rotate out of the factor? To try to answer that question, we first need to find a measure for the current state of momentum. One measure would be the RS Spread Index (RSSPREAD) which looks at the difference in performance between a basket of high-momentum names versus a basket of low-momentum names. If the RS Spread Index is moving higher, then the high-momentum names are performing better than the low-momentum names and vice versa. Using the RSSPREAD, we looked at the rolling 3-month performance of the index with reading above 15% being considered “hot” momentum markets. While there have been periods that have well exceeded 15% (tech bubble era, GFC, and covid), it is an acceptable line of demarcation in “normal” market environments.

Now that we have a measure for “hot” momentum markets, let’s look at how momentum strategies fair moving forward. As a first look, the performance of RSSPREAD following a 15% gain over the last three months should give a decent indication of how momentum strategies fair moving forward. The table below breaks down the results. We’ve removed clusters within three months to look at first occurrences only. RSSPREAD tends to continue to push higher on short-term and long-term time frames, however, the three-month period was rough spot compared to the other time periods observed. Even though the average and median numbers were slightly negative over the three-month period, it was not material enough to say that it’s worth rotating out of momentum strategies. This is especially the case when looking at the one-year numbers.

While RSSPREAD may give us the indication that momentum strategies can continue to do well following a strong momentum backdrop, it is not a directly investible asset. To remedy this, we’ve looked at the performance spread between the Invesco Nasdaq Dorsey Wright Momentum ETF (PDP) and the S&P 500 Equal Weight Index (SPXEWI). On average, PDP outperformed SPXEWI over each time frame observed but this outperformance becomes more muted when looking at the median. The percent positive metric is typically sticky around 50%, so it’s a coin flip whether PDP outperforms SPXEWI over the observed time frames. At worst, there appears to be no clear indication that momentum strategies will suffer after a strong run. To get back to the original question, if momentum has been doing well, then should I look to rotate out of the factor? There’s not much evidence supporting rotating out of momentum following a good performance window in the long run.

Daily Option Ideas for March 17, 2026