Dollar Index since the Plaza Accord …room to run, BUT (?) …UPDATED

12/30/2016 – updating the US Dollar Index post

  • bearish divergence – check
  • 1.618 price projection hit – is this an a-b-c correction and the dollar has peaked? Potentially … or is wave 3 of 5 concluding w/ a pull back imminent?
  • SENTIMENT is extreme bearish for the EURO and GOLD
  • note – we are hitting the same TIME correction in a couple days as the move up from 1992-2001
  • Economist .. the best contrarian indicator out there.

CLIFF NOTES: if you read below you’ll see there are other targets higher.  We are approaching the same TIME as the last move up in the dollar against the smash from the Plaza accord so the ‘no brainer’ long dollar trade is one that begs of caution.  Is this THE top in the USD and now we go back below 70?  Don’t know, but a preponderance of evidence suggests STIFF resistance from now into January for the USD.

dollar

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11/19/2016 – if you want to follow the Dollar posts, just search dollar on the top right area of the blog.  the overall thesis, which has proven to be correct so far, was the dollar was going to strengthen all the way from the low 70’s.  it’s been a nice run …

is there higher to go … yes.

but then …

here’s the picture – note, I’ve used the high from the Plaza Accord in 1985 to put the .382 retracement on the chart. That also overlaps w/ some nice other extension and retracement ratios.  Believe the highlighted area in/around 107-108 is going to be key.

also, note the TIME component between the last major rally from 1992-2001.  Next month, or, depending on how you draw the time component, perhaps January the Dollar Index should run into some pretty stiff resistance in TIME.

last thing is the Elliott Wave count … I always tell people – I LOVE Elliott wave – when it works.  here, the count has been pretty much a “Ray Charles count” on a long term basis.  I’ll try to walk you thru the importance:

  • market corrects in 3 waves labeled a-b-c
  • the market moves impulsively in 5 waves
    • wave 2 can’t overlap the beginning of wave 1
    • wave 3 can’t be the shortest
    • wave 4 can’t overlap the beginning of wave 1
  • if you take the low in 2008 and start working your way up we see that we are ‘clearly’ creating 3 waves into yesterdays price action.
    • here’s where it gets tricky .. simply, I don’t know if this an a-b-c big corrective move OR we are impulsively going higher in a 1-2-3-4-5 sequence.
    • the key here – wave c (of a-b-c) always has to be 5 waves (unless in a triangle)
      • so if you look you can see the ‘small’ 1,2,3,4,5 being carved out (Turkey reference) so the blue highlighted area 107-108 COULD be the end of a C wave and the entire A-B-C move OR the end of wave 3 and we correct 4 and then off we go again in 5.

I honestly have no idea …. 

Here’s what the charts are SHOWING US:

  • square root target
  • the ‘time’ of the last corrective move
  • the ‘count’ showing we are in the 5th wave of C and 3
  • EXTREME sentiment for a strong dollar
  • the .382 from the all time high
  • divergence set up on Monthly RSI
  • ‘other’ extension and retracement targets

Expect some major resistance .. again, we are 6 handles away from the target area and that represents HUGE moves in currency .. BUT remember, right now, we are at extreme (not historic) but extreme sentiment and this has never proven to be wrong from a contrarian indicator. This puppy could snap back on you really really quick.

only TIME will tell … let me know if you have any questions.

B

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3 Comments on “Dollar Index since the Plaza Accord …room to run, BUT (?) …UPDATED

  1. Hey Bart,
    Really tells the story of the dollar, technically.
    Nice observations, should be really important for
    a lot of markets.
    Have a great new year (and beyond !!).

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