Major Volume Supporting The U.S. Dollar As Gold And Silver Come Under Pressure

By: Jeb Handwerger | Mon, Oct 25, 2010
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Secretary Geithner is trying to give support to the currency as the tensions have grown on a devalued dollar. This past week he has stressed the importance of a sound currency. The U.S. definitely wants to devalue the dollar in a slow and steady way. The plunge in the U.S. Dollar, which is still the world's reserve currency, created a lot of international tension and speculation into gold and silver. The Fed wants to slowly devalue the dollar, not create a panic. If it is collapsing too far, too fast then the Fed or Geithner will come in and make comments to support the dollar. The November election and next weeks Fed meeting could make a significant impact on the bullish dollar trade. I believe the fiscally conservative candidates will gain a lot of support. This could have a bullish impact on the dollar as an expectation of less spending and printing will provide some support for the dollar.

The collapse of the dollar has caused other countries such as Japan to intervene in the markets to support the U.S. Currency as a weak dollar curbs demand for Japanese exports.

PowerShares DB US Dollar Index Bullish Fund

Although I have called for a dollar bounce over the past week I want to reiterate that I do not believe the move will be long lasting. The currency crisis is in early stages and quite often there are violent corrections which provide long term holders a great buying opportunity. Investors should be aware of the massive buying in the Dollar ETF (UUP). This signals a major move going into the dollar as it tests all time lows. It could signal a bottom.

This bounce in the dollar and correction in gold is to shakeout weak hands from the long term trend. It also hurts investors who have been buying in at very overbought levels. Throughout this 10 year bull market in gold it has been a series of two steps ahead with one back. Now we are in the retrenching stage which is what I warned about exactly two weeks ago. Major moves when sentiment levels reach extremes is accompanied by powerful reversals which we have observed this past week in the dollar and gold. This past week we saw a major gap down and a break of the 20 day moving average. I do believe this short term down trend could continue for a few weeks to work off overbought conditions and to shakeout late comers and investors who are over leveraged.

Look for gold and silver to move to support and create a new buy signal. Patience is key to buying gold and there continue to be times along this bull run where gold is oversold and out of favor. I am looking for those key areas. To find out key areas of support and price levels where secondary buy points should occur log on to my website at for my free daily newsletter.

Disclosure: Own Gold, Silver, Mining Stocks and Some U.S. Dollars



Jeb Handwerger

Author: Jeb Handwerger

Jeb Handwerger

Jeb Handwerger

I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love.

In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family.

Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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