The way stocks handle the US dollar rally could be a sign of market strength and hint that the January rally could last. The US dollar is strong in 2022, with the dollar index hitting a peak of 114.78 in September. At the same time, stocks have sold off due to dollar strength, its impact on U.S. Treasury yields and what it means for companies with a global footprint. But since September, the dollar index has been sliding and is now approaching a range that could support the S&P 500. “DXY is showing bearish exhaustion based on weekly candlestick sessions and that is the long term support around 100-102,” BTIG’s Jonathan Krinsky wrote in a Thursday note. “While we have our doubts, if the market can ease the dollar rally in the coming weeks, that will be far from a bullish case.” History shows how large fluctuations in the dollar can impact the entire stock market. CNBC PRO looked at the 5 biggest monthly gains in the Dollar Index over the past 5 years, and the S&P 500 recorded significant losses in all but one of them. If the dollar recovers and stocks hold on to recent gains, it could be a good sign that the upside momentum has footed. The dollar index near 100 is a key level many technical analysts are watching – it is considered by Oppenheimer as one of the big numbers for 2023. Oppenheimer’s Ari Wald said, assessing the row’s impact. Commodities, currencies, and interest rates on securities, it’s not always an asset’s strength or weakness, but how stable each asset is over time. That’s why the dollar is stable in a round figure and staying in the range is so important. “The stability of the internal market will create a bullish environment for the equity market in the months and coming quarters,” he said. Of course, according to Katie Stockton, managing partner of Fairlead Strategies, relying on historical correlations can be difficult because sometimes they break down. However, she is also watching for a major correction in the dollar and according to DeMark Indicators sees a positive signal on the dollar index flashed on Jan. 13. .DXY 1Y line DXY YTD “Things” it suggests that from the support area we should see a rally or the dollar recovers,” she said, adding that this would mark a shift in sentiment towards the dollar. If the dollar strengthens, the positively correlated Treasury yields will also likely rise, which could be a headwind for equities in the near-term. However, if the dollar bounces back, yields rise and equities don’t react negatively, that could be a good sign of strength, she added. “I would take that as a positive,” Stockton said.