I AM A FUTURES TRAITOR?
I was going to talk about something different since I have already recently stated my short term bearish dollar view. However, based on a few emails on this topic I decided to beat this old dead horse. The play on words refers to my betrayal of the anti-herd position on the dollar. Those precious few who are bullish on the dollar, some of whom are the greatest traders in the world, may think I am a traitor for breaking rank for just a minute. I state all the time in here that I hate being with the herd, and the dollar bears are the biggest herd I have ever seen in this business. However, you don't want to be too much of a smart ass in being contrarian just to aggravate people and create arguments. The herd is not always wrong, there are moments when they are right. You don't want to make a habit of following them, but that does not mean that at any given moment the sun won't shine on them for a day here and there.
The main reason that recently I had stated that I was looking for a short term sell signal in the Dollar Index is loud and clear on this chart. You can see the large long position the large specs and small specs have, coupled with the large short position by the commercials. This comes in the midst of a well defined weekly downtrend. This is an ideal sell setup in my opinion. It also fits with my short term bullish metals view. However............!!! The one thing to keep in mind when looking at the dollar index, is that it is itself a very lightly traded vehicle. If it were a large volume market, this COT picture would have me jumping at with both hands.
The real way to get a broad view on the Dollar Index is through the individual currencies themselves, then adding that all of them up. This becomes a mathematical quagmire quite frankly. Net net alot of individual currencies are in bearish situations, which makes me view this as a shorter term setup. If it were not for that I would be exceedingly bearish on this market. There is so much more volume in any one individual currency market than the whole Dollar Index has, that they mean alot more in developing an overall currency view.
Also you can see we are at the time of the year where the dollar typically rallies. Also Larry Williams very advanced cycles show a very bullish situation for the dollar. As a result, I have been looking for a sell signal here, but will not expect a big down move as a result of this. I am really looking more for a long entry from a bigger picture standpoint. Since we have such a bearish short term setup, it may mean we go down and give those lows a good test. I have not yet entered a short position so it is possible this trade has left the barn without me today. If it did so be it, the bar pattern was marginal and I don't take marginal trades regardless of how they turn out.
I am rooting for this to decline simply because it will help my Long Gold position I put on Sunday night. My rooting for a trade has never had an effect one way or the other unfortunately, so it is really a waste of energy. Sugar also is beginning to look interesting to me so I will be talking about that shortly.