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Sunday, December 5, 2010

Sunday Observations!!!

The Elliott Trader, and for those of you from the chatroom(CiL) known better as ET, has a new video out this week-end on you-tube were he looks at the SPX and the USD in technical terms and orthodoxed Elliott wave, enjoy!!!

A look at the long-term future of the US Dollar!!!
This is the longest term chart that is available from Stockcharts back to 1983. The Dollar has been stuck in a sideways trading range for the last seven years starting back very late 2003 once the Dollar broke below the $93 level. Since then it has traced out a contracting triangle and today it is slightly below the median point of $81.31 of the triangle. The Dollar reversed last week after making a high of $81.525, right above that median point.
Triangles are normally a period of consolidation that helps relieve extreme over-bought/sold conditions clearing the way for a resumption of the original trend, in this case, down. However, it has been shown many times in Elliott Wave Theory that triangles are also misidentified as corrective structures instead of a trend changing structure, or base/starting point of an impulsive wave, that is a 1-2, i-ii combination.
The Indicators on the Monthly chart are also at a neutral position with the MACD at -0.004, the RSI at 47.93 and the STO at 34.35, all in all, flat across the board. Even the 20 month MA is close-by, at $79.97.
The next break-out on the Dollar will be its most important long-term move in many years.

For the Bullish case the Dollar needs to first get back above the 20 week MA and the Median line to make a run towards the upper trendline before it can challenge the previous high of $88.71. Any break above this point I believe is a very long-term buy signal for the Dollar. The indicators are slightly favoring this direction with the MACD in over-sold conditions and the STO in a rising trend, or on a buy. The RSI is right at the neutral point.
For the Dollar Bears, the buck would first need to break below the lower trendline and challenge $75.63 level, and if that low is surpassed I believe the future of a strong US Dollar is history as odds quickly escalate that the Dollar will soon began making all time new lows.
I am hoping the Buck follows along the Bullish path because a collapse in the Dollar would most likely trigger hyper-inflation with prices on most goods increasing at a much faster pace then wages can keep up, and with unemployment at record high levels odds are wages will continue to fall, a very bad combination. Then to make matters worse, yields on Treasuries will sky-rocket destroying what little borrowing is taking place for future growth and put the whole US in a perpetual downward spiral with no escape. Doomsday.

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