Kensho Stats

Dollar forms bullish 'golden cross' — here's how to trade it

Dollars dollar
Thomas Mukoya | Reuters

The U.S. dollar index formed a bullish "golden cross" pattern, which could mean more gains ahead for the greenback, according to technical analysis. And history suggests a rising dollar could have a big effect on the stock market into year-end, determining the winners and losers.

A so-called golden cross is formed when a security's 50-day moving average crosses above its 200-day moving average, potentially signaling the beginning of a longer-term uptrend. This occurred on Friday for the Dollar index, which measures the currency vs. a broad basket of its peers.

U.S. Dollar Index, 3 months

So if the dollar does continue to rally for the next three months, what will that mean for stocks?

Using Kensho, we looked at all the times that the Dollar index gained at least 5 percent in three months and what happened to the Dow Jones Industrial average and its members.

A big rise in the dollar is typically not bullish for the overall market. Here's the Dow's average performance doing the 13 strong dollar occurrences, along with the best and worst sectors in the market during those periods.

But there are some Dow members, especially ones with big domestic revenues, that can thrive in a strong dollar environment:

International conglomerates and banks get hit the hardest:

(Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.)