Figure 1 is a weekly chart of the Dollar Index. This is the same chart I have
been showing since June,
2009 - prior to the Dollar Index unraveling. Last week there was a weekly
close (price bar with down red arrows) below the low of the immediate positive
divergence bar at 75.20. Closes below positive divergence bars (price bars
highlighted in pink with gray oval) tend to lead to selling as traders expecting
a reversal close out their losing positions. The down trend continues, and
as the
data shows, there is a high likelihood of the downward move accelerating.
75.20 becomes resistance and a weekly close above 76.58 would end the down
trend.
Figure 1. Dollar Index/ weekly
Now let's look at the Dollar Index from a completely different perspective.
Figure 2 is a weekly chart of the PowerShares DB US Dollar Bear (symbol: UDN).
This is the inverse of the Dollar Index. The indicator in the bottom panel
searches negative divergence bars, and we have had a cluster of these over
the past 13 weeks. As discussed recently, this can be an ominous topping pattern
or a spring board to higher prices - i.e., a blow off market top where prices
really accelerate higher. A weekly close greater than 28.70 would suggest higher
prices for UDN, which means a much lower Dollar Index.
Disclaimer: Guy M. Lerner is the editor and founder
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