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This could be the turn I’ve been looking for. The US dollar index is rising above the 2009 low – OK, just barely so far – and gold has failed to hold above a GLD of 139.54 on its first try. Yes, it’s early and gold could find its mojo and the US dollar could lose its nerve. Let’s see what the next few hours bring. But do watch the 2009 low in the US dollar index and the breakout point just mentioned in the GLD. Also watch the 1294.26 level in the SP500 index. If that is broken this afternoon, a sharp sell-off will follow.
Update 3-21-2011 @ 1:52 pm ET: Even with the US dollar index testing below the 2009 low, it seems like a reversal point. Being short is often not pleasant just before a turn. But I’m willing to exit if the index does not hold today (probably scale out in steps). A close of the dollar index back above 75.63 would be a very positive sign that today was a test below support with a reversal.
Update 3-21-2011 @ 5:44 pm : The dollar index has closed below the critical 2009 low for a second day. The third day is required to nail this new low (and reversals can still occur after day 3 of course). Scaling out of the trade in steps may be the best approach as I do not feel the trade is dead unless the Euro makes a new high and holds it above the Nov. 2010 high. It has not yet done that. We are close and the top that is being formed looks very similar to the final spike up in price before the Nov. failure. So stay tuned.
Update: 3-22-2011 @ 2:32 pm: The US dollar index is up slightly today at 75.43, just 0.20 points below the breakdown point. There is still the chance of a reversal, especially considering the fact that the Euro has failed to break out above 1.4281. It is now at 1.4206. The SP500 index has lost the battle with 1294.26, which was an important resistance point it closed above yesterday and is now below at 1293.94. The wheels of the correction are still turning.
The reversal in the EUR/USD trade could come precisely as the SP500 Index fails to breach its resistance decisively. Coincidence? I think not. And gold failed to make it over the key resistance point on a close (see prior posts).
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© 2011 David B. Durand, M.D. All rights reserved.