Has the dollar topped out?
Don’t forget, the Free Trial offer to my exclusive VIP TRADERS CLUB will kick off on Monday and will stay open until Friday January 20. This is your chance to see for yourself how I can guide you as a member into promising trade setups with illustrated real time charts and analysis using my Tramline Trading methods.
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As a terrific example of how members just this week have banked huge profits in a market that was little watched until late last year. We already had positions working by then!
Until mid-2016, not may traders were following the Chinese yuan cross with the dollar, but that was about to change when the strong rise in the dollar was finally picked up by the MSM and made headlines. Recall the dollar was very unloved then as the Fed was keeping Fed Funds rates low and bond yields were falling and many were calling for a continuation of that trend into negative territory.
But when Treasury yields made a solid low in July (which we noted at the time), the dollar likewise started to turn back up. One of the markets I was keeping a beady eye on was the USD/CNH, the latter currency being the Chinese Yuan traded offshore mainly in Hong Kong. It has a large following, particularly in the Far East where the futures market is very active.
It was in August that I had a solid buy signal as the market broke above a major trendline following a large momentum divergence. Club members were long in the 64 region and we rode the bull run for the next few months.
But this week, I noted that the market was edging up in a fifth wave on a large negative momentum divergence and advised members in my Trade Alert of Tuesday to set a sell stop under the market at 6950 and on Wednesday, it was duly touched.
Many were calling for the 70 round number print, but I had my doubts, noting that when a simple round number forecast is widely believed, the market rarely obliges and often falls a tad short. In fact, the high trade was 13 pips shy, so traders looking to take profits at or above 70 were sorely disappointed. Such is the price for excess greed.
This is the chart of our Chinese campaign
I knew the rally was on borrowed time this week (in a fifth wave and with large mom div), but just admire the collapse in the past two days. That is the result of what can happen when too many specs move over to one side of the boat: it capsizes. It also illustrates the old market adage that markets fall out of the window faster than they climb the stairs.
To answer the question in my heading, it appears the dollar has indeed topped – at least for a while.
Gold and silver will be loved again
Remember way back in mid-December when everyone was bearish on the PMs? Not too many had a good word for it. What use is gold which pays no dividends when compared with rampaging stocks which do? That was the thinking then – but what a difference a month makes.
Back then, the COT data showed specs at a record net short – a highly unusual situation – and ripe for a massive short squeeze.
Gold was trading down to $1120. And that was when I called the low for VIP Traders Club members and advised taking long positions (as I did with silver). Today, gold is trading $60 off the lows as the shorts are starting to feel uncomfortable
In fact, my target on the downside was in the $1120 area because that was in the region of the Fibonacci 78% support level of the entire rally off the December 2015 lows to my purple A wave high. And what lovely symmetry! A major low in December 2015 and another in December 2016. Using the Principle of Alternates, can we expect a major high this December? That would imply the high for this rally phase would last a year.
It is certainly possible. It may take that long for the last of the gold bears to finally throw in the towel. At the $1120 low, DSI (Daily Sentiment Index) reached a record 4% bulls reading and that was when I knew the bears were trapped.
But at the high to come, I expect a similar lop-sided DSI reading where well over 90% are bullish. I am sure the MSM headline writers will come up with some sensational headline – right at the top.
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