Outside Bar Days In Precious Metals and The U.S. Dollar Indicate Changing Trend Sentiment
Important developments are taking place in Precious Metals, The U.S. Dollar and long term U.S. Debt that need to be monitored closely. On Friday, Ben Bernanke spoke and the markets reaction was very bullish for the dollar. The U.S. dollar ETF gapped lower during the week, then closed the gap through an outside bar reversal on the largest upside volume since the beginning of the decline in June. This outside bar reversal on huge volume comes at a time when we have recently seen some reversals in gold and silver on huge volume. This is indicating a change in sentiment. The dollar has been in a 4 month downtrend. I warned readers of a collapse in the dollar on September 15th followed by a bottom signal on October 7th. Smart money seems to be ahead of the trend, and that is why I am alerting readers to a correction in precious metals and a rise in the dollar. Observe the price volume action since last week and the outside reversals in both the dollar and gold. It indicates a countertrend rally in the dollar and a correction in gold and silver. During this correction I will be monitoring the gold and silver market for secondary buy points. Over the past few weeks the equity markets- especially basic materials and commodities- have been rising on expectations of another round of treasury purchases. This exodus from the dollar into basic commodities has been extremely parabolic and a corrective wave may be beginning. Speculation and leverage in gold and silver were reaching extremes. The widely accepted quantitative easing that was expected at the next meeting in early November may turn out to be less significant than expected. China's attempt to raise interest rates, Geithner's discussion of a strong dollar, and the Fed's concern of Treasury prices is indicating the market was over exuberant in anticipation of another round of easing. The dollar will continue to bounce as gold, silver and base metals correct.
Disclosure: I am long gold and silver stocks.