US Dollar Index

The Real Head and Shoulders Top The UUP ETF

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There has been a lot of talk about the head and shoulders topping formation in the broad market indices in construction since November of 2009.  Head and shoulders patterns are reliable patterns but they are definitely not guaranteed.  Sometimes they do fail.  I believe this one will fail because it does not have enough symmetry … Read more

I just went long the United States Oil Fund LP ETF USO

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Going long the United States Oil Fund LP (ETF) USO or the ProShares Trust ProShares Ultra DJ-UBS Crude Oil UCO ETF may be one of the most attractive trades I have seen in a long time.  It looks like it is an outstanding contrary type trade. I already mentioned that I am expecting a bounce … Read more

Is the Next Major Top in Gold and the SP500 Really Going to Be This Simple ?

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euro20091202

usdollarindex20091202

A lot of market analysis sometimes boils down to some very simple analysis.  But we humans try to make market analysis as sophisticated and complex as possible to make ourselves look smart and feel important.

But could it be that the next major trend change or at least consolidation and retracement be due to the two simple charts above?  I think it could very well be.

The Euro is trending higher on a solid up trendline and appears to be close to the point of some type of final blow off run into that red zone I labeled in the first chart above.  Conversely the US Dollar appears to be headed into that red zone of support, perhaps also in ‘blow down’ fashion.  When either the Euro or the US Dollar Index hits those zones I would logically expect some type of big downward bounce in the Euro and upward bounce in the US Dollar Index.

When they get into those ranges I would think the powers that be (central bankers worldwide) would start making a lot of noises that their currencies have gone ‘too far out of line’.  So that type of thing could cause some huge bounces and break downs and it will probably coincide with them hitting those red zones above.

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Another 5 to 7% Drop for the Dollar or 5 to 7% Rise for the Euro

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There was a great article by Kathy Lien over at moneyshow.com where she makes the forecast and argument that the US dollar could drop another 5 to 7% and that the Euro could conversely rise another 5 to 7%.

The reason this article is important is because the almost perpetual and persistent advance in the SP500 has derived a lot of it’s energy from a slow and gradual falling dollar.  Gold and commodities have also benefitted from this trend especially in the current near term time frame as it appears the gold price is moving into the parabolic stage.

But the main point of the article that I find key is the perspective that currency moves tend to be quite persistent and not that likely to change direction once a firm trend is in place.

She identifies this 5 to 7% range of advance (in the case of the Euro) and 5 to 7% decline in the case of the US Dollar Index and it is interesting to note that those levels correspond to the Euro hitting the resistance level near its previous major high and the US dollar hitting the support level of its all time low.

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