DOLLAR INDEX BREAKING DOWN AGAIN
By Carl Swenlin, Decision Point
The U.S. Dollar Index is in immediate danger again, so lets take a close look at charts from all three time frames, beginning with the daily bar chart. The most important feature on the chart is the bold rising trend line near the bottom. That is a long-term rising trend line that we will see on the longer-term charts. Note that in November the Index bounced off that line only to retest and penetrate it just a month later. The November breakdown was a bear trap, resulting in a strong rally, which ultimately failed.
The decline from the January top has resulted in a test and retest nearly identical to the previous one, and we are left to wonder if this latest breakdown will be another bear trap.
I am assuming that this is more serious than the first. As of 1/20/2011 the US Dollar Index is on a Trend Model SELL signal. And the PMO configuration is less promising than the oversold PMO bottom in October followed by a PMO positive divergence in November.
The weekly chart below shows the entire rising trend line and demonstrates that it is important support. The weekly PMO is negative and falling.
Finally, the broader context of the monthly chart shows that the rising trend line forms the bottom of a reverse pennant formation. A decisive breakdown from that pennant would have serious implications regarding the potential downside.
Bottom Line: The Dollar Index has broken down through important long-term rising trend line support. A similar breakdown in November proved to be a of no consequence, but technical indicators are less favorable this time around, so we should expect the decline to continue longer-term, although, a short-term snapback toward the line would be a normal technical reaction.
At what point does the FED get scared of a dollar crash and raise rates? Or would they welcome a dollar crash and fail to defend it? I don’t see how a weaker dollar makes the US economy stronger in view of the higher oil prices it would face.
I am sure this has nothing to do with MMT , the fact that the US can print as much dollars as it wants wothout any consequences.
Banzai Ben does not care about the USDollar–He has stated that foreign currency is “Under-Valued”–Our weak dollar has been a driver/support for higher stock prices–Feal Better–Feal the Wealth?
From the Gulf Coast: Wk-End Update: Confidence Ratios
Stock/Bond Ratio: prefers Stocks : Small/Mid Cap
Bond/Bond Ratio: prefers High Yield: HYG is an example
Stock/Commodity Ratio: prefers Commodities: DBA, DBO would be examples
Emerging Mkts/Commodity ratio: prefers Commodities: last signal Dec 2010
Stock/Gold ratio: prefers Stocks: Last signal on September 2010
Trader Notes:
Stock/Gold ratio may turn back in favor of Gold this WK–Eyes Wide
Why has the Emerging Mkts/Commodity ratio given a Sell Signal?
In these countries Food Cost is a larger percentage of Total Income
Maybe I should say the Emerging Mkt countries know Inflation when they See it/Feal it.
From Hyper-Inflation central:
The FED can’t see Inflation because of the way it weights prices in the CPI and the approach of “Aggregate Pricing” vs “Standard of Living”
Below is a link that is a MUST READ!!
http://www.dallasfed.org/data/pce/2011/pce1101.cfm
You can download the data on Weight by Item the Dallas FED uses–
Your own Weight by Item would be different in the “Standard of Living” basis.
“Gretsky” said “The Key to Hockey”
“Look where the Puck is going not where the Puck is”
Sounds like a key to investment success also!
Here is a site worth a look
http://macrostory.com/
Thats all folks
No recommendation to buy or sell securities–
But some tacos and a cold beer would be just right!
Here is a similar take on the USD/Commodity complex
http://blogs.stockcharts.com/chartwatchers/
To be pragmatic…
The carry-trade is fully loaded and over-crowded.
Applying a trend-following model on $IDX without analysing the main G10-FX-cross is can lead to great disillusions.
The USD will die again, ’cause to the FED, sentiment is back to winter 2009…
The Euro will die, ’cause to the pigs, remember summer 2010…
But what the pundits always forget is… even a dead cat can bounce and hurt a little…
Moreover, betting against the USD now is betting against the trend of the 2Y-SWAPS, and their technical says a very different story than the spot.
You believe the USDollar will rally because of the 2yr swap spread?
Clarify–I did not notice the USD rallying along with bond yields last wk
I believe USD will rally because cross-asset class view.
Cross-asset view allows to see turning points.
We will see this summer, where the USD will be…
65 or 85 ? make your bet…
That would not be “investing” if you are “betting”, right? As many have said the Stock market as a “free market enterprise” is long sense dead and all we have is a casino, where everything is just a “bet”.
A truhful answer, yet so revealing as to the undertones of the market.
CFTC data shwos almost record bets of Euro appreciation, FT has an intersting article that the bets has been driven by hedgies. The private wealth guys hasn’t jump to the party yet.
http://www.ft.com/cms/s/0/e050b72e-4823-11e0-b323-00144feab49a.html#axzz1FrLoxndZ
Interstingly, what is not talked about is that the Euro has depreciated as much as the dollar against other majors.
ECB’s art of deception
“The subdued reaction seen in the dollar shows that the market is not completely convinced that it is happening right now. If more evidence of recovery shows up in the economic data, then there will a tug of war between the dollar and the Euro in their bid to appreciate. The question is which will prevail? From the looks of it, I would bet my money on the dollar.”
I think we have detected the same setup.
IMHO (i stay in Eurozone), I will put my bet on the dollar against AUD & NZD.
Signs are not clear for EUR/USD right now.
The March 2011 Future for the US Dollar shows it exactly at the November low now. I agree if it breaks decisively below this level in the short to mid term, look out below. Big B will cry.
They have no choice BUT to kill the dollar. It is politically impossible to eliminate SS, Medicare & Medicaid. It does appear that they want the entire system to collapse so they can start over and eliminate the hand outs.
I think in a back room it was already decided to devalue the dollar, the yen, and euro in tandem. However the euro will collapse in full at some point soon (soon being 2 years or so). I think global companies that pay dividens will be where to invest in when you sell your gold. I’m no expert, so just an opinion to put out there.
Folks you don’t get it yet the paper $ is worthless, Uncle sam is past broke, if todays $ is worth one penny the debts might be paid but every one with USA paper $ will lose everything! Thats where we are headed… same for the EURO.
What is the PMO indicator shown above??? How is it calculated???
Price momentum oscillator
Check out the decision point site under learning center
http://www.decisionpoint.com/TAcourse/PMO.html
It is a handy tool –but not the only tool one might use to determine direction.
Thanks for the info on the Price momentum oscillator – I appreciate it.
the US is supposed to be a world leading economy. So having problem now with the dollar just shows how unstable any economy can be if the proper logistics for GDP are not put in place.
If I get this right, the govs want to kill the dollar and form a world currency, the rest of the markets will go to the floor, and you all are worried about survival, right?? Short the indexes over the next 6 years and you will have all the money you’re going to need. Kind of a simple, no brainer process. Enjoy the ride !!