Currency Market Summary for Week Ending February 28th

The March Dollar closed sharply lower on Friday as it renewed February's decline. The low range close sets the stage for a steady to lower opening when Monday's night session begins trading. Stochastics and the RSI are diverging but turning neutral to bearish signaling that additional weakness is possible near term. If March extends the decline off February's high, December's low crossing at 79.50 is the next downside target. Closes above the 20 day moving average crossing at 80.49 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 80.49. Second resistance is the reaction high crossing at 80.91. First support is today's low crossing at 79.70. Second support is December's low crossing at 79.50.

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The March Euro closed higher on Friday as it renews the rally off February's low. The high range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI are diverging but turning neutral to bullish signaling that sideways to higher prices are possible near term. If March extends the rally off February's low, December's high crossing at 138.93 is the next upside target. Closes below the 20 day moving average crossing at 136.59 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 138.26. Second resistance is December's high crossing at 138.93. First support is the 20 day moving average crossing at 136.59. Second support is the reaction low crossing at 135.62.

The March British Pound closed higher on Friday as it extends the trading range of the past two weeks. The high range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If March resumes the rally off February's low, monthly resistance crossing at 1.7043 is the next upside target. Closes below the 20 day moving average crossing at 1.6550 would confirm that a short term top has been posted. First resistance is last Tuesday's high crossing at 1.6821. Second resistance is monthly resistance crossing at 1.7043. First support is the 20 day moving average crossing at 1.6550. Second support is February's low crossing at 1.6247.

The March Swiss Franc closed higher on Friday and posted a new contract high. The high-range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If March extends the rally off January's low, weekly resistance crossing at .11615 is the next upside target. Closes below the 20 day moving average crossing at .11187 would confirm that a short term top has been posted. First resistance is today's high crossing at .11398. Second resistance is weekly resistance crossing at .11615. First support is the 20 day moving average crossing at .11187. Second support is the reaction low crossing at .11067.

The March Canadian Dollar closed higher on Friday. The high range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI are turning neutral to bullish hinting that a short term low might be in or is near. Multiple closes above the 20 day moving average crossing at 90.34 are needed to temper the near term bearish outlook. If March renews the decline off last week's high, February's low crossing at 88.99 is the next downside target. First resistance is last Wednesday's high crossing at 91.60. Second resistance is the 38% retracement level of the September-January decline crossing at 92.32 . First support is last Friday's low crossing at 89.27. Second support is this month's low crossing at 88.99.

The March Japanese Yen closed higher on Friday as it extends the trading range of the past three weeks. Today's high range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If March renews the rally off January's low, the 62% retracement level of the October-January decline crossing at .10026 is the next upside target. If March renews the decline off February's high, the reaction low crossing at .9672 is the next downside target. First resistance is the 50% retracement level of the October-January decline crossing at .9920. Second resistance is the 62% retracement level of the October-January decline crossing at .10026. First support is last Friday's low crossing at .9725. Second support is the reaction low crossing at .9672.

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U.S. Dollar in a Large Energy Field, Capable of Carrying it Much Higher

The dollar index happens to be lower for the week as of this writing, however it is higher for the month and also the quarter. In fact, a close around current levels would represent the best close in three quarters for this index. We continue to be long this market based on both weekly and monthly Trade Triangles.

However, we would like to see this market begin to gain some upside traction soon, otherwise it is in danger of rolling over and negating the powerful energy field that’s below this market. Let’s just be patient, and see how this market plays out on Thursday and Friday. This index is coming from a large energy field that is capable of carrying it much higher, possibly up to the 80.00 – 81.00 area. Intermediate and Long Term traders should maintain long positions with the appropriate money management stops in place.

The December Dollar closed higher on Wednesday ending a two day correction off Monday's high. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought, diverging and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 77.31 would confirm that a short term top has been posted.

If December extends the rally off August's low, the 75% retracement level of this year's decline crossing at 80.29 is the next upside target. First resistance is Monday's high crossing at 79.65. Second resistance is the 75% retracement level of this year's decline crossing at 80.29. First support is the 10 day moving average crossing at 78.07. Second support is the 20 day moving average crossing at 77.31.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 85



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Holiday Squeeze on the Dollar, Gold & Stocks

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me.

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

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