The US Dollar continued higher today with a very wide range bar. The move really started accelerating in the middle of the night in the US session, and extended the gains throughout the day. You can see how prices started to trade past the trend lines a couple weeks ago while those lines were still negative. Then as the line crossed to the bullish side, price drifted back a bit to test the trend indicator before blasting off to the upside. There was some warning of this about three weeks ago when the double stochastic gave a divergence right at the bottom, and at about the same time the media was all over itself talking about super-models and rap stars dumping on the dollar, and every single analyst on CNBC and elsewhere were saying the dollar was going to keep dropping into eternity, maybe even going into negative numbers. Yet technical analysis made a case for going against the crowd and taking an opposite position. Just remember that when Gisele says she will no longer take Euros and now wants to be paid in US Dollar, run the other way.
The gold market has been taking signals mainly inverse from the US Dollar. Today gold declined a bit, but not nearly as much as the rise in the dollar would suggest. Prices are still forming a triangle, with the trend indicator going about as flat as can be. Momentum has returned to the downside. I would expect price would break out of this triangle soon. If it runs too far into the apex the power of the triangle would be diminished. It looks like a downside break is the most likely outcome, however a retest back up cannot be ruled out if the dollar encounters a little profit taking. I dislike taking breakouts from these formations. Usually if the breakout is a good one, there will be some retesting of the breakout area. Waiting for a retest can result in missing the rare move that just keeps on going in one direction after the breakout. The gold market will often breakout in one direction, and then do a head fake and go the other way. If it goes the other way but stalls out at the breakout point, and then momentum reverses back down, it would present a less risky entry point in my opinion. Markets will do what they can to get you on-board in the wrong direction, and trading breakouts is a way to get positioned on the wrong side the vast majority of the time.
The chart to the left is the Baltic Dry Index, which is very sensitive to global economic activity, and especially the activity of shipping dry bulk good to China. There is a clear double top formation a few weeks ago. The pivot in between those tops was broken and now a secondary swing point low looks like it is in the process of being taken out. I put the fib retracement lines on the chart to show where this index might find some support. This is based on just the last swing up from July of this year. There has been a much greater move going back further in time that is not seen on this chart, however this might show initial support levels. If reached I’ll post longer term analysis.
And finally here’s the etf of the S&P 500. The trend indicator is still trying to hold up. Price is now challenging the support. If momentum can turn up from its oversold level a rally of some sort could occur, but the market feels heavy and the path of least resistance looks to be down. The advance-decline line is deteriorating, especially in the Nasdaq.
I may only post in the next two weeks when conditions warrant. The number of hits on this site have dropped off by more than half over the last week. I assume this is due to the holidays. Maybe it’s because I haven’t been posting pictures of Gisele. Maybe it’s my bearish bias. I haven’t been bearish on everything. I’ve been bullish on the dollar.