Tuesday, August 30, 2011

USD Update

Click on Chart to Enlarge

This chart shows the extreme length of trendlessness in the US Dollar Index. The ADX being trendless for so long is basically a basing activity setting the stage for the next strong trend. I think this will be up. Look for the ADX to turn back up above 20 with the +DI above -DI. That would indicate a new uptrend. That will likely correlate with declining commodities. So again, this view would support a top in gold close at hand.

Speaking of gold........Over the last 3 weeks as gold made some sizeable gains, the CoT data showed that large speculators did not increase long holdings, they actually fell some. So that basically means they are out of cash to devote to this trend. They are trend followers, so this should be a sign of trend exhaustion. Additionally, the "smart money" commercial hedgers did increase net long by a correspondingly small amount, when they usually go against the price trend. This basically means that the last 3 weeks have caught the smart money in a blow-off short-covering rally. However with no ability/cash for the large specs to push the trend further, I believe the message is that gold IS in its final gasp before a major correction.

As a side note, today stocks were up, bonds were up, commodities were up, AND the US Dollar was up. So all the major US asset classes were up. Usually there are some inverse correlations that keep this from being common. I have seen others mention these "all up" days before. The takeaway was that it often preceeded at least a brief drop in stocks. So while I don't have any data on this, it may be a clue that some selling may be in store after a "buy the U.S." day.

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