Thursday, July 23, 2009

USD Ready To Rally?


There is an almost constant drumbeat of analysts and commentators who are calling for the collapse of the Dollar ( and by extension, a huge increase in the value of gold ). However, if the above chart labelling is correct, the Dollar may have completed a large flat correction which will lead to the largest rally since 2008. While ideally, the Dollar index would fall below the wave 3 of C and A lows, it is not an absolute requirement. The current 5th wave may be a truncated 5th wave.

Currently, the % of Dollar bulls as measured by the Daily Sentiment Index is less 7%. Such low levels of bullishness are often associated with significant bottoms.

A turn here in the Dollar would likely mean gold and oil are ready for a fall. As far as the stock market is concerned the correlation is less certain. At this point, I do not think a Dollar rally would derail the market, but we will have to wait and see.

It will take a sustained move back above the 80 level and a breakout above the trendline to confirm the bottom is in.

3 comments:

dave said...

Tues or Weds a guest on CNBC said that 961 was an important Fib retracement level. Without looking into it or thinking about it i just accepted it. So last night i actually looked at some RT levels retracing Oct 07-March 09, 961 isn't even close. Do you have any idea what 961 is Fib wise ??

This gym rat has been up & working all night. So i've occasionally peeked at S&P futures trading in the night session. Even when they were down earlier they were never down much, certainly not commensurate with AMZN & MSFT getting hammered. I'm a bit surprised.

With AMZN & MSFT trading below their June highs in after hours trading, i thought that enhanced the possibility of the same for DJI & SPX and therefore the possibility of a false breakout to the upside AND therefore the possibility of a broadening or megaphone top.

Regards,
dave

R. Craig Pritchard said...

I get 962.25 as the 38.2% RT from the May 08 high to the March 09 low. I don't see that as a significant fib level though. Some people use every swing high. I think it's best to use the major highs and lows. To each his own.

Yes I was surprised to see the muted futures this morning. This rally has legs.

I can't get over the bearish analysis everywhere I read.

dave said...

"Some people use every swing high. I think it's best to use the major highs and lows..." Totally agree

Yes I was surprised to see the muted futures this morning. This rally has legs." Yes, like
http://www.yousephtanha.com/blog/wp-content/uploads/2008/05/real-transformer-movie-5.jpg

"I can't get over the bearish analysis everywhere I read." Worse, than that. It amazes me the sizeable losses that many bears are sitting on/thru. One blog/trader shorted a sizeable position of OIH just before the 10 consecutive up days (among his other large short positions). Some people just don't "know" how to take losses.

Regards,
dave