Saturday, December 12, 2009

Dollar Breakout

The US Dollar Index continued its breakout from last Friday this week. With multiple buy signals including a positive divergence MACD buy signal, trendline breakout, and a clear 5 wave impulse move from the 11/25 low, there is little doubt that higher prices will be seen. However, some sort of pullback lasting 3 to 5 days could occur beginning next week. This could very well be the impetus for a false breakout in the stock indexes, which would be followed by a reversal once the Dollar rally continues. The effect of the Dollar rally on the stock indexes may be muted if the recent action is any indication as the indexes have been flat, not down, during the first leg of the rally. That could change though.

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