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Sunday, November 7, 2010

Sunday Observations!!!

With way the markets are behaving, it keeps coming back to the Dollar as one of the most important factors to determine the future of the equities markets, one other is the Treasury Market. The weekly chart of the $USD is at an inflection point right now, it either recovers and gains some strength ASAP, or breaks below $74.23, where it will challenge the all-time low of $70.70 and most likely breakdown making historic new lows as the Dollar collapses.
There are three distinct ways the Dollar can play out, each are labeled in their own color. The Green option being the short-term bearish option with the collapse already in progress. Fortunately the argument right now does not support this option because the weekly indicators are in extreme over-sold conditions and are ripe for a reversal, leaving the Red and Blue options as favorites. One is long term very bearish, and the other, long-term bullish, hence why we are now at an inflection point that could effect the Dollar for years to come.
Between the Red and Blue option the big million dollar question is if we are building a triangle that supports the Blue option, or are we building a base for the 1-2 up Red option. Prechter talks about this because many triangles are labeled prematurely before the price action wraps up, mentioning that corrective triangles can turn into a impulsive 1-2, 1-2 count before all is said and done. Both of these options have the Dollar reversing before making any more lower lows and running up to the $87.50 level. This is where the two depart, one continues making higher highs, the other reverses and opens the door to a long sell-off in the Dollar.


It is simply amazing that the yield on the 30 year treasuries is now equal to, or higher then mortgage rates. Can this mean that long-term investors are betting that risk is now higher on long-term treasures defaulting over that of a 30 year mortgage. This market is dis-connected from reality and shows the extremes that QE2 is capable of because of FED intervention and manipulation of treasuries. This is a very unhealthy balance with short-term yields still in a total collapse and investors selling out of the longer-term bonds causing those yields to rise.
Senior U.S. House Republican opposes Fed easing plan
Ryan said the Fed should stick to its main job of ensuring price stability, adding that the Fed's plan was "destabilizing" investment outlooks.
Now if we could just get a few more in Congress to grow a back-bone!!!

6 comments:

  1. Looking at the major crosses, the USD appears to be bullish; let's see what happens this week at the G20 as the BRICs--and Germany--voice their concerns to Ben and Tim.

    GBPUSD
    http://99ercharts.blogspot.com/2010/11/gbpusd.html
    EURUSD
    http://99ercharts.blogspot.com/2010/11/eurusd_06.html
    USDCHF
    http://99ercharts.blogspot.com/2010/11/usdchf.html
    USDJPY
    http://99ercharts.blogspot.com/2010/11/usdjpy_06.html

    Good luck!

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  2. Michael there's one other count for the Dollar (and is actually my favored view). I'm looking for an ABC up from your red (C) with wave B as a triangle. In other words we are just finishing c of B and have d and e to go before the big upwards break to C.

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  3. Michael, where is the max low (upcoming) that stops your green option coming into play? from a couple of shorter term fibo and trendline projections I could see some targets just below 75. Are you happy if it stays above 74.23 from Nov09?

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  4. Here's something I posted a while back on Ticker Forum that is possibly still in play. In fact, we'd be just a (v) of [v] away from a completed C on an updated chart.

    http://img708.imageshack.us/img708/8746/usdew.jpg

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  5. Taking into account the overnight action in the USD, and supposing my basic short term Elliott Wave on the USD is correct, I would have to put very high odds on the dollar move down being done.

    That count from a from a few weeks back would have its green {v} finishing last Thursday. (That would basically leave the triangle intact though. And the zigzag? I'm not sure how it would leave the longer term count.)

    We'll see.

    ReplyDelete