A rising dollar is a headwind for most equities, but brief DXY spikes are noise. This composite gate keeps only sustained strength: DXY above 100, 15-day momentum positive, and price above its 65-day average. All three must hold. That fires on just ~10% of days since 2009 — a rare, high-conviction tail-risk regime, not an everyday signal. As of October 9, 2026 the signal is ACTIVE (DXY 102.2, all three conditions met).

Sector returns are mildly negatively correlated with the dollar day-to-day. The edge is that when DXY clears 100, that inverse relationship intensifies for rate-sensitive sectors. Real Estate (XLRE) is the extreme — its correlation amplifies by -0.25, the most of any sector — followed by Comm Services and the defensives. Energy is the lone inversion: its correlation turns less negative (+0.053), because dollar-denominated commodity contracts rally with the macro backdrop that drives the dollar up.

At the one-month horizon the regimes pull apart with statistical significance. Energy (XLE): +2.8% in strong-$ vs +0.9% in weak-$, a +1.9% edge (***, p=0.0000) — the cleanest signal in the study and a near-exact match to the source deck. Financials lean positive (steeper curves), while the rate-sensitive defensives (Staples, Utilities, Real Estate) underperform in strong-$ windows. The edge is a 21-day phenomenon — too noisy at 1 day, matured by a month.

• XLE — The Structural Hedge. The only sector that benefits from strong $ (amplification +0.053, +1.9% 21d edge). Overweight during DXY>100 to capture commodity rallies — do not default to cash here (filtering XLE historically worsens drawdown by 1pp and costs the biggest rallies).
• XLP — The Alpha Generator. A weak-dollar compounding engine; mild strong-$ headwind, and filtering strong-$ periods improves its drawdown (+4pp). The core defensive to rotate back into when the signal turns off.
• XLRE — The Rate Reactor. The most regime-reactive sector (-0.25), highly binary. Strictly avoid when the composite signal fires.
• XLC — The Drawdown Trap. Neutral on a single day but devastating in the tail — filtering strong-$ windows avoids +18pp of max drawdown (the 2022 multiple-compression slaughter). A strategic-avoidance candidate for tail-risk control.

When the signal is ACTIVE (now): overweight XLE · XLF · XLI · SMH and reduce/avoid XLRE · XLP · XLU · XLC. When it turns OFF: rotate back into the rate-relief beneficiaries (Staples, Real Estate, Utilities, Comm Services, Discretionary). The signal onset historically precedes the sector rotation by 5–21 days, so a fresh firing is a prepare signal, not a same-day scramble.

• Tail-risk overlay, not an engine. It is active only ~10% of the time — use it to tilt a portfolio at the margin, not to build one.
• Keep Energy exposure. The most common mistake is defaulting to cash on a strong-$ signal; for XLE that destroys value. Express the macro tilt by overweighting XLE, not exiting it.
• Honest replication notes. The core (XLE +1.9% / p<0.001) reproduces the deck closely. Some sectors are less statistically significant on yfinance data than the deck reported, and XLRE (2015+) and XLC (2018+) have shorter histories than the headline 2009 window. The 2022 validation (signal active 41.8% of that year) is the cleanest real-world stress test. In-sample, not a walk-forward backtest; transaction costs unmodeled.