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How Could I Forget the Only Market Chart that Matters?

Currencies / US Dollar Dec 02, 2009 - 09:55 AM GMT

By: Guy_Lerner

Currencies

Figure 1 is a weekly chart of the Dollar Index. This is the same chart I have been showing since June, 2009 - prior to the Dollar Index unraveling. Last week there was a weekly close (price bar with down red arrows) below the low of the immediate positive divergence bar at 75.20. Closes below positive divergence bars (price bars highlighted in pink with gray oval) tend to lead to selling as traders expecting a reversal close out their losing positions. The down trend continues, and as the data shows, there is a high likelihood of the downward move accelerating.


75.20 becomes resistance and a weekly close above 76.58 would end the down trend.

Figure 1. Dollar Index/ weekly

Now let's look at the Dollar Index from a completely different perspective. Figure 2 is a weekly chart of the PowerShares DB US Dollar Bear (symbol: UDN). This is the inverse of the Dollar Index. The indicator in the bottom panel searches negative divergence bars, and we have had a cluster of these over the past 13 weeks. As discussed recently, this can be an ominous topping pattern or a spring board to higher prices - i.e., a blow off market top where prices really accelerate higher. A weekly close greater than 28.70 would suggest higher prices for UDN, which means a much lower Dollar Index.

Figure 2. UDN/ weekly

By Guy Lerner

    http://thetechnicaltakedotcom.blogspot.com/

    Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

    © 2009 Copyright Guy Lerner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Guy Lerner Archive

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