Here we have the update chart of the dollar index from earlier this week when I showed the potential break of a downtrend line. When we combine this with the three point divergence in the Oscillator at the bottom, we do have a potential bottom in this market developing. There are also some pattern mapping models that call for a low to be made here, so we might be in business now. As per usual, we can never know if this is a major low or not, but if we combine this with the extreme short positions of commercials of many individual currencies, we begin to see the makings of something.
I have used this setup to filter out longs in other markets, primarily the Euro and Swiss Franc. Some of my short term momentum patterns indicated a potential breakout trade there, but I passed on those trades due to the dollar looking like it was making a low right on schedule with the pattern maps. Why would I want to be long currencies if I thought the dollar was going to rally, just did not make sense.
You may also remember at the beginning of the week I posted that due to negative momentum patterns in ETF's that I thought the breakout to new yearly highs in stocks was false on a short term basis. This also turned out to be correct. Sometimes as much as I personally get very tied up in all these cute little indicators and the like, you just have to step back and see how everything fits together. This business will always be about thinking, you cannot be a complete robot and just click the mouse anymore.