WHAT'S IN STORE THE NEXT FEW WEEKS?
Predicting what will happen is a difficult task obviously. I have done it very accurately over the last few weeks, but that is no guarantee I will always be this accurate. The whole point of engaging in this exercise to begin with is to be prepared to act accordingly when certain things happen. We need to be especially ready if and when they play out in line with our expectations.
Above is a weekly Dollar Index chart. One thing I would like to point out here is the achilles heel with oscillators. As you can see at the bottom, the oscillators have been diverging this dollar move most of the way down. Had you just traded off that alone, you would have been cleaned out buying and getting stopped out over and over again. No matter how you construct them, there does not seem to be a way around this, so it just needs to be accepted as a limitation with them.
Notice how we are approaching the typical seasonal low which has historically been around the first of the year. We have rallied quite a bit and are now up against resistance areas on weekly charts. Also, the inverse of this market, the individual currencies and metals are into weekly support levels now. We are seeing commercial selling in the DX on this rally, which is a sell signal due to how strong the downtrend is. We can never know when retracements in trends are happening whether they will become a trend reversal, or just fall back in line and resume the current trend. We have tools we can look at to help. Most of those tools are indicating to me that a short term sell signal is here in the Dollar, and buy signals in currencies and metals. Since the metals are free falling at this point, unless you are a really strong bull, I would not recommend just blindly buying them here. We need to have a shorter term pattern in both the DX and Metals and Currencies to trigger an entry.
Here is what I am forecasting to happen over the next few weeks. A dip in the Dollar and rally in the metals and currencies, which will setup the real big time trade opportunities in January. Those are going to be short basically everything and long the Dollar. There has never been a more obvious trade to me than to short the Stock market next year. Every time I turn on the TV that imbecile in the oval office is behind something else that is bad for the US economy. At some point all of these things are going to cause a meltdown, and I think that time is coming now soon. If he is intelligent than it means he is ruining the US intentionally, so I hope he is just stupid.
There are times in your life where the collective just screams at you that there is an obvious big picture opportunity at hand. 2005 in Real Estate was one of those, when I sold my McMansion and cashed in a seven figure gain. That could not have been a more obvious trade. I believe we are now at a similar point in time. This whole government sponsored rally is not going to last, and I really believe this is another rare opportunity to make a market killing. Timing things is a different matter, but we are in a zone where something is going to give soon.
It seems to me that overall these rallies across the board are traps that are about to be sprung. I am a bit worried that the metals are just going to keep tanking and not give us that second chance, but there is so much bullishness that the real bulls are nowhere near a capitulation point yet. It is the bounce and subsequent failure of it if that occurs, that will trigger a very large selling wave. Once the world realizes they have been sold a bill of goods there I think it is going to be shocking to some how fast that market unwinds. Another thing to consider is that thus far the commercials are not buying this dip in GOLD. I would like to see that before considering a long entry. However, if I do get a short term bullish pattern that sets up in this price zone, I will go long GOLD for a short term trade as well as currencies and short the dollar.
If I see that pattern setup I will post it in here in a timely fashion.