STRONG DOLLAR POLICY?
I heard someone the other night on TV from a political group talking about our strong dollar policy needs to remain in place. Does this look like a strong dollar to anyone? All the government interventions in the markets are driving the greenback into the dust. I would like for someone to explain to me how constantly injecting all this capital into the system is a strong dollar policy, it is the opposite of that? This has really been a sharp decline in the last month and a half as you can see on this chart. However, this is not without hope. We have reached an incredible extreme in this market now with the ADX reading 83 right now. In general markets tend to reverse direction once they get beyond 60 although there are exceptions such as Gold. Gold has reached several readings of over 60 and barely missed a beat, but that is an anomaly.
We also have one of the momentum oscillators starting to diverge quite a bit here, so it is time to start looking at this market a bit more closely. If we were to close down today I might take a swing at buying this Monday on a rally. I do not consider that to be a high probability trade since the trend is so strongly down here. The reality of this is that unless the stock market slows down a little, it is unlikely the dollar will recover. These two markets are trading lock and sync with each other in an inverse fashion. Which drives which is anyone's guess. By watching price intraday, it appears to me stocks drive this but many sharp people claim it is the opposite. I really don't care, but I do know that when I watch short term prices, stocks move first then the dollar follows, not the reverse.
The other way to play this same idea would be to short some of the currencies. The way I see it the one that is lagging the most is the British Pound, so that would be the one to look for a short entry in.
If you look at this and compare this to most of the other currencies it is clear that it looks completely different. Most of them are rising on a 70 degree angle, and are basically the opposite look of the dollar index. I think if the trendline above is broken, a short entry can be done.
That is all I have for today, good trading to everyone.