Thursday, November 12, 2009

Watch The U.S. Dollar

Above is a daily chart of the U.S. Dollar and in the lower pane is the RSI indicator. Notice we are seeing multiple bullish divergences in the oscillator. On its own a divergence it simply a red flag or warning which is why I never trade off of just divergences, I need to combine it with something else.

In the above chart I drew a trendline which hasn't been broken since this bear market began. By combing the breaking of this trendline with the bullish divergence, we can increase our odds of success. Watch the dollar for two closes above this trendline to confirm that this currency has put in a bottom.

In the chart below you'll notice the inverse relationship between the greenback and the stock market. Every time the dollar has bottomed it coincided with a top in the stock market. If the dollar does indeed break its trendline and heads higher, it will put pressure on stocks which would confirm my already bearish stance on stocks. Lets see how things unfold.


getyourselfconnected said...

Just stumbled upon your site and I like it very much.

That said, the dollar is the key here. While our dollar has fallen, and the stock market rolled upwards, our markets are matched tick for tick to the upside, yet other currencies (euro) have appreciated giving them a boom for the buck, sort of speak. Good work if you can get it, and I imagine payment for all the MBS we sold them (and have now bought back) but this is all going to end badly.

dacian said...

Imo, there will never be a bear market in the US with these masters pressing buttons; I read here and there that one must buy gold because it will go parabolic, as each time there is weakness in the market, Bernanke prints a trillion $. The greenback goes to hell with no pause, which is good for markets. We go to 20.000 on the Dow and we'll experience a 10 year bull market; you know why? because we has such a fall in 2008.

I love this country, is so great!


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