It has been a while since we looked at the dollar index, so today we decided to dissect this market and look at it step by step.
What is happening in this market is very interesting and we think you will see in this short video just what we have in mind.
Just click here to watch "Dollar Index Going Higher" and as always, our videos are free to watch and there are no registration requirements. Do you agree with our analysis of the dollar index? Please feel free to leave a comment and let us know what you think.
Last weeks price action unfolded just as we expected. Money poured into stocks with the focus being on small cap, banks and technology stocks. The fact that these sectors are showing strength while utilities, health care and consumer staples lag is a good sign that investors are once again taking risks in the market.
Because investors and traders are bullish on the stock market again the money flow into the safe havens like Gold and Silver decrease. I believe this is the reason stocks moved up last week while precious metals drifted lower.
Below are three charts (Dollar, Gold and Silver) showing what I think is most likely to happen in the coming week or two.
US Dollar Index – Daily Chart The US Dollar has put in a very nice bounce/rally since the low in November 2009. Last month the dollar finally reached a key resistance level of 81. I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.
Take a look at the daily chart below. You can see a head & shoulders pattern and a neckline which appears to have broken late Friday afternoon. There is a strong chance we could see 78 reached which is the measured move down. If we get follow through selling this week then I would expect 78 to be touched within 5-10 days.
GLD & SLV ETF Trading Charts Precious metals have been moving very well for us recently. From looking at the charts using technical analysis we were able to catch the Feb. 5th low and also the Feb. 25th low on a several ETF’s.
As you can see from the GLD and SLV charts, both metals are not in an uptrend showing bullish chart patterns and trading at support. If we see the US Dollar break down next week then be ready to go long gold, silver and stocks.
Precious Metals, Stocks and the Dollar Trading Conclusion: As a technical analyst the above charts are pointing to higher prices in the coming day’s which is exciting for us all. BUT when things are this perfect looking we must be very cautious as the market has way to suck people into setups like this and spit them out a couple days later for a nasty loss.
Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us. That is why I continue to wait for my signature low risk setup before putting any money to work.
My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require downside risk to be under 3% for the investment of choice when the broad market shows signs of strength, as well. I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.
It is very important to wait for the market to confirm a move higher before taking a position with this type of setup. The market could go either way quickly and jumping the gun is not a safe bet.
We ended 2009 with the overriding consensus that the dollar was going to be under pressure and keep moving lower against the euro. Well guess what, the euro proved to be even weaker than the US dollar as it moved to levels not seen since May of 2009.
So what happened? Was conventional thinking wrong, or did the market get it right? We may be at a tipping point where conventional thinking could well be wrong again.
In our new video we share with you what we see in the euro/dollar cross right now.
Just Click Here to watch the video and as always our videos are free to watch and there are no registration requirements. We would really like to hear back from you, with regards to your thoughts on this cross rate. Please feel free to leave a comment.
