"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Saturday, August 17, 2013

US Dollar - no clear trend

The US Dollar, as measured by the US Dollar Index or USDX, started the year off on the strong note and looked to have regained its status as "King Dollar" until the beginning of last month when it put in an outside reversal week lower on its weekly chart. Interestingly, it put in the same exact pattern a year ago in the same month. (By the way, for those are not technical analysis geeks like I unfortunately am - an outside reversal week pattern is one in which a market which has been trending higher makes a NEW HIGH for the week only to then CLOSE LOWER than the previous week's LOW. It is generally regarded as a fairly reliable BEARISH signal).

It is difficult to point to an exact reason for this change in sentiment towards the Dollar right now given the fact that the US economy is in better shape than Europe and Japan ( that is not saying much) and appears to have entered a season of rising interest rates accompanied thus far by a soaring stock market. For the first half of the year that was all that investors needed to see and into anything US Dollar related they ran. Something has changed that - or at least it so seems.

It might well be that the US fiscal house disorder is coming back to the forefront of investors'/traders' minds once again as the federal government is up against its borrowing limit and once again the usual circus in Washington on the Potomac is back in town. Whatever the cause, the Dollar has now moved lower in 4 out of the last 6 weeks and in the two weeks that it did manage to close higher, the high of that week did not exceed the previous week's high price. That is not exactly a show of confidence as it is certainly not bullish.

While it is still higher on the year (barely) the chart is picking up some signs of waning upside momentum. The high price made this year in July exceeded the high of the previous July 2012 and that outside reversal pattern but the indicator did not score a fresh high; instead it registered a lower high resulting in a BEARISH DIVERGENCE. This in and of itself is NOT A SURE Sell signal unless it is confirmed by subsequent price action, which of course the market did. Even at that, the Dollar has not broken down technically on the price chart .

I would have to see  a weekly close BELOW the band of "MAJOR" support noted on the chart to turn bearish the Dollar. Right now I am ambivalent towards it, being neither bullish or bearish except for the shortest of term trades.


  1. well, they never make it easy, do they? looks a bit stronger for the lows being in for the pm's, but of course on the other hand, around Labor Day has marked important tops also; I suppose buying $1-$2 breaks in silver is the right play; fx is a mess and I stay short Yen; btw, a couple weeks ago Briese called for energies to be topping, and they do look stalled out to me; have a good wknd everyone, steve in sparks

  2. Hi Dan, thank you for all of the work you do for your followers and friends very unselfish, and you are consistently correct, I for one am very appreciative and hope you will continue, your valuable insight. Steven

  3. not a very useful analysis if i may say so. what you are saying is that if it goes higher it is bullish and if it goes lower it is bearish, predictive capability = zero. thanks a lot

    1. Karim,
      As the title suggests- no clear trend.
      If you are looking for predictions, go to a reliable fortune teller, if there is one.

  4. Hi silver jim,

    If you understand cycle trading style you can predict the trend.

    Cycle trading style company with fundamental.it is the most effective way( for me ) to see market.

    you learn that and master it, you will be 80% correct.


  5. Hi Dan,

    I thought it was explained, by you and a few others, that there is no backwardation in gold, yet we still have commentators and media mentioning it, the latest one being:


  6. Preditor1976; anybody talking about being right 80% of the time is a clown; steve in sparks

  7. Hi Steve,

    The end game of investment is how much money in your pocket... Just like warren buffet... Why he so rich, cause ( just to name 2 reason)

    1) he do not have stop lose.
    2) he carefully analysis the situation and invest when thing are difficult or look bad.

    Cycle style investment is powerful.... Just like weather it have cycle, holiday end of the year bonus all this it effect our live and behavior.

    For example Yen , I short yen at 77 and book my profit at 96 ... Now I am out of the market of yen trade.

    If a clown does make a lot of money, I will be most happy to be that clown .


  8. White Wolf, u r forgetting the 2 biggest phony, hypocrite crony capitalist fraud banksters of all; buffett and his running mate munger; people mocked and criticized me 20 years ago on my assessment of the maestro greenspan, so we shall see about the latter politically connected recipients of the best sweet heart deals of all time served up by the street and d.c. at the expense of the American public; steve in sparks

    1. Yes, Buffett, He stick saved BAC right when the stock was going under $5 a share a few years back with his infamous Preferred buy. Looking back I thought the market would understand, but no. They piled into the common like termites in a condemned house. Perfect analogy. Steve, what I see is just a completely manipulated market everywhere. From the yield curve to PM's, to oil, to stocks. It is very disheartening. Just look at the oil range. It is like a flatline since the days of $150. Range trade..on and on forever. Until one day. It will not last forever, but they still have control

  9. Once and for all Dan, will you explain that there is no backwardation going on in gold? Once the perma bulls drop that argument I will begin taking them more seriously; if the bulls would even advance the idea that bull spreading gold is to sell into the front and buy the back, which is what you would also do if bullish stks, then I would pay attention, but you never hear or see proper thinking, only end of the world bullshit; steve in sparks

    1. Steve - A lie will spread halfway around the world before Truth can even get out of bed. The spreads have definitely tightened in the futures markets with the August, October, and December contracts basically bid at the same price, which is indicative of a tight market but the overall structure is still not one of backwardation as there is a $.80 discount of the December to the February and a $2.80 discount of the December to the June.

      I have no problem calling any market backwardated if the board structure indicates such but many of these guys keep confusing the BASIS with the structure of the futures market. They are completely different.

      The problem is that falsehoods tend to take hold because people do not pay much attention to details nowadays and play fast and loose with the definitions and meanings of words.

      Martin Luther said it best: " Hypocrisy and Lies have their wages but truth goes a begging".

      Today the focus is on the FOMC once again as we wait with bated breath to see what our monetary masters will dispense to us mere peasants.

    2. "If you tell a lie big enough and keep repeating it, people will eventually come to believe it."

      - Joseph Goebbels (ministry of Nazi propaganda)

      It's all the more easy nowadays when whatever information is copy pasted in N different blogs without checking if true or not...plus it's easier to believe in something you want to believe is true. Maybe many gold bugs want to grab every hope they can to see the end of the bear nightmare...even if hope is not 100% based on truth?

  10. Looks like another credit crisis brewing, gold holding up better than stocks right now, but who knows?

    Gold could be destroyed any day if bonds drop off a cliff.

    Looks like Bernanke has decided to sit this crisis out, maybe he wants to leave Yellen or Summers a mess to clean up.

    I thought for sure he would have rescued the bond market by now after Bill Gross was squealing bloody murder last week.

    1. Mark what happens to everything else if bonds drop off a cliff. Bernanke was your hero, you should not abandon him now. He knows gold is going higher and if it does not the stocks you praise and worship will all crumble. I am not suggesting I know what will happen but you seemed to be sure you knew.

  11. Dan; Good luck with the mkts; beans up $1.50 on manufactured bullish weather expectations in 9 days; what a joke; nice chart; starts on sunday aft with a gap power play; is it a wonder that there is no real volume left at the Merc or Board or Comex or whatever fake exchanges they try to make you believe in? See you later, I have no more interest in these mkts, and that is after 40 years; good luck, steve in sparks

  12. Steve, I agree that there is no backwardation and the gold pumpers are really starting to wear on my nerves. I, like you and Dan know that one day this system will implode, but I think this can go on a lot longer than people think.

    By the way, I just had to LOL that you have been shorting silver. How does your butt feel? Not trying to be mean but it just makes me chuckle a bit. I really don't understand how you could be shorting silver at 19, and I still don't understand it at 23. The primary miners go out of business at these prices.

    1. Adam,

      The miners cut all cap x, reduce labor, hedge and slowly die. I am sure the Banksters control them and it is just a matter of time until the announcement of consolidation begin. Large Banks will own portions of them. Sad.

  13. Adam; stopped out of yen, beans, silver; that is all; there are no charts or fundamentals in these busted mkts; silver up $4 on what? steve in sparks

  14. btw, miners are not the smartest businessmen that ever came down the pike and if you really think the cost of production is key, then you probably were not around when sugar went down to 2 cents and everyone screamed that it took 5 cents to make profit; yeah, that took about 2 years to play out, and really, do you believe what they hand you about what real costs are? take care, steve

  15. Hi steve,

    There is a lot of overhang inventory in sugar when the price is at 2 cent. That is market function to reduce supply from the market. No people want to product something at loses.

    But silver is different, there is no over hang inventory as we go by ,this world is going to need more silver this fundamental wheather you like or not...


  16. preditor1976; u r living in a dream world and obviously think like friedman, Keynes, and krugman; if we had real mkts there would be no sugar mkt at all in this country and if there was no fake ethanol involved corn would be much, much lower, and as for silver, I guess you r going to show me how it should be 15-1 vs gold; lol, lol,lol; steve in sparks

  17. and as far as gold moving from west to east, what a joke, are you moving to india, Russia, or china next week and do you really think they have the ability to act as a reserve currency? ever been there? filthy, dirty, scummy business people for the most part with no rule of law and do you have bank accts over there? no?, oh, I thought so;steve

  18. You seem to be a smart and experienced trader. But those "filthy, dirty, scummy business people" you refer to have much more clout than you seem to be aware of. They will rule the day in the not too distant future. We print money out of thin air, how many societies do you know that could do that without repercussions. We make the rules for now, but those "filthy dirty scummy people" are buying up this country on the cheap now.

    1. Lots of people thought the Japanese were going to rule the world in the late "80"s, as they bought Hawaii, California, and New York; 10+ years later they puked their guts out with 50% losses and the rest is history; the same story is playing out now with the Chinese, who as a country are going to get old before they get rich, if you believe in demographics like I do; and the Indians and Russians? lol, ever been there? nice stock and bond mkts, huh? take care my friend

    2. Steve I hope you don't just own paper when this ship collapses. You sound extremely arrogant, just like 80% of the rest of the country. Those "filthy, dirty,scummy business people" in the east will rule us one day. If it takes the loss of all of your paper wealth to finally admit it, then so be it.

  19. Sad fact is that the U.S. has been printing money out of thin air and it has been a resounding success.

    Just look at all the Wall St. pros crying and wailing because the 10-yr. yield is at a paltry 3% and we have 1.5% inflation.

    Meanwhile many Asian countries like Hong Kong and Singapore who practice sound money banking are seeing their currencies destroyed and stock markets decimated, with inflation problems everywhere.

    1. Actually, at beginning, printing money out of thin air always looks like a resounding success. It was a resounding success in Weimar Germany at first, during a few years, until inflation showed its ugly nose and rapidly turned into hyperinflation.
      I don't know if hitory will exactly repeat itself this time (let's hope not!), but I believe that given time, every action leads to conséquences, and the same kind of action (debasing a currency) leads to the same kind of consequence (loss of trust, potential hyperinflation). I don't know if the dollar would collapse alone, or would take all other major western currencies with it, anyhow, that's why I keep considering gold as the safety net in front of this madness.

      And if you are not convinced that the world is going mad, or rather, that 99% of people are still part of the Matrix, read this article below, especially topic 12. I would laugh if it was not so sad. Personnally, for sure, I will bet on the discovery of a golden asteroid rather than on a promise that "it will never go beyond X million". How absurd! But people are buying this BS, just as they still believe that USD is safe. I think this will eventually change. But it will be too late for them.
      History is a continuous reminder of currencies having lost most of their value. The ruble, when the Soviet Union collapsed. Ruined thousands of "rich" people in that currency over a few weeks.¨Pound Sterling at beginning of 20th century, the reserve currency then, etc...

    2. oops, here is the link.
      Sit down, have a nice beer and get ready for a good laugh. Don't choke at point 12.

  20. Hi Dan,

    The US $ could be in for another advance when you look at this monthly chart. The comments are in Dutch but the picture tells the story.


  21. Tuesday August 21, 2013 2:33PM


    1. Hubert; Are you saying that this is a final dip down in the $ or that it is going much lower from here? thanks for your response, steve in sparks

    2. Steve,

      1-When you see the numbers, for example:

      Oil down when tapering is supposed to be positive for oil because the economy is supposed to be stronger and therefore the FED action can be reduced.

      Gold flat when tapering is supposed to be negative for gold.

      DOW down when a stronger economy "used to" bolster equities... and you can add whatever else you like on the list.

      2- Tapering is now "a sure thing" ...by the end of THIS YEAR and not September anymore (read the headlines of the BS media)

      3- The end of this year means January when Bernanke is out and a new pawn is stepping up to the world stage.

      4- 10 Y Treasuries going up despite speeches from all these clowns at the FED, the fact that it is bad news for the housing market, bad news for the US deficit (Interest on the deficit will grow by a MINIMUM of $100B a year just because of the recent spike in rates)

      When you add all of this plus what I did not put above, you know that the US Dollar trend is down and down and down. Are we going to see spikes up? IF you don't know the answer to this one I am wasting my time replying to you!!

      So my answer is "it is going to go MUCH lower from here"

    3. I globally agree Hubert, though you may see some short-term spike up sometime in the future, like if they really try to "taper" for a while. But down against what? Gold? That's the best long-term bet at this point. Euro? Aussie? Canadian Dollar? I'm already not sure anymore...in Europe, many countries need a lower EUR/USD, not stronger. Draghi is an Italian ex GS fond of QE. Not exactly the head of the Buba. If the dollar collapses, and if the euro keeps going higher, I'm not sure we won't have a new load of super LTRO, etc, etc... especially if some of our big banks are dependant on the swap dollar agreements with the Fed. Easy for the Fed to play give and take and ask for the ECB to help a bit, as it probably did with the BoJ...

  22. FOMC minutes come out and the immediate response is to dump gold and buy Nasdaq screamers like NFLX and GOOG that have P/E ratios over 100.

    Funny how the "Glam" stocks are virtually unfazed by currency moves, overseas market meltdowns, adverse commodity trends, central bank mutterings, etc.


  23. I like to compare views here with those of Forex Kong as he's a forex trader specifically - but comments / trades gold as well stocks / options.

    These guys both know what's going on in markets now question - and it's great when "each of them" as well as a couple others I follow all say the same thing.

    Rare.....but great.

  24. Steve,
    I am even ready to put my head under the guillotine (after all I am French and it is not a bad way to end -and you don't have to worry about the cleaning...LOL)

    We will see 3% on the 10Y before the middle of September and 3.5% before the end of the year.

    The US Dollar Index will test 79 before the end of THIS year, will rebound shortly and go TOWARDS 72cts after. When this happens the 10Y will rise to 4% on its way to 5%.

    Comments and ready to place your bets. Please don't lose your head over this one

    1. ok, let's set up the Guillotine, just in case.
      Nothing personal here Hubert, I think you'll feel relieved if it's another French dude who pulls the trigger? :) :)

  25. Looks like its the standard "sell everything" mode post-FOMC, Embry says financial system crash and meltdown is coming but unfortunately gold will go down 3x faster than everything else.

    Right now many are hiding in the "Glam" names like Tesla, but eventually those will also become unglued, as Bob Brinker says:

    "When the paddy wagon drives up to the house of ill repute, everything goes, including the piano player".....

    Unless Bernanke comes to save the day with a major, unexpected futures ramp, looks like he's planning a major global dump to cleanse the system so he can go out in a blaze of glory when the markets eventually rebound from the Sept. - Oct. lows and scream to new record highs into the end of the year.

  26. Hubert; I am afraid we are looking at different charts. Are you buying Chinese RMB, Korean Won, Vietnamese Dong, the Cable, Aussie, the Loonie, the Euro, which is a failed experiment and will be at .80 where it started when it ultimately implodes. Oh, how about the Russian ruble, or the Indian Rupee? Sure, ultimately the $ blows up, but I suggest that the other fiats go way, way, before. Maybe it is the Yen that you like? lol, lol, lol; steve in sparks

    1. Hubert, imho Steve also makes a point here, I mean anyway to me, it's really difficult to guess who will go first in this environment.
      Many other currencies are in trouble as well, and are from "peripheric" economies.
      The USD is still the core of the western economy.
      It may be in the deepest trouble, I'm not sure the periphery won't give up first.
      And that would actually feed the dollar.
      You know, a bit like a big storm in the ocean, and all rats leaving the smaller boats first to try to find a safe place aboard the dollar Titanic.
      Maybe what will happen is that the western CBs agree with each other to keep such currencies as EUR, USD, etc...artificially in a loose range, in order not to hurt each other too much.

  27. Ready to put your head as a bet?

    YES I am buying the RMB. Loonies I have a lot and I hope my government will stop playing nice nice with the American Administration. In fact Canada has started to wake up to the US blackmail and is working on export of resources to not only China, Europe and South America but is only starting to build pipelines for the benefit of Canadian.
    As for the Euro its value will reach 1.6 before getting down to 80.

    Don't you see that the USA has lost its power. Nobody listens to Obama anymore. What was your force the "mighty dollar" is now the currency everyone is afraid of holding. You want to cut your aid to Egypt? Saudi Arabia has no problem giving the cash and even more. The main issue here is when you lose the trust of your allies, when they are ready to call your bluff and win, you open the door to other "allies" ready to call your bluff too. The worst part is that your past "allies" become your new "nemesis".

    The Chinese played America very well, using America greed and arrogance in order to achieve what was not possible to achieve without a war...

    America is dead and if you don't believe it too bad.

    Anyway, you think whatever you want and I do the same. This is called democracy...something America has abandoned a long time ago. NSA...NSA...checking...test 1 ,2 ..

  28. Hubert; There is a lot of truth in some of the things you say; America is sick as is the majority of the rest of the world, but to say it is dead is wrong; steve in sparks

    1. hum...this is a discussion, don't put my head in a basket for aguing a little (anyhow French like to argue and complain a lot just for the pleasure of it, don't they? :))

      "Don't you see that the USA has lost its power."
      "America is dead"
      It is a bit "cliché" to me, many French since De Gaulle keep predicting that the american empire (sorry, republic? whatever...) is dead, etc...it's been 30 years, actually. We have a long tradition underestimating their resilience. Which America are you talking about? The megalomaniac US government, be it democrats or republicans? Or the people? Maybe I'm wrong, but I think that some values are deeply anchored in this nation, and they will be difficult to root out. I would be surprised if Big Brother manages to win just as simply as that. To make it short, a country is made of its people, and even if they have to be concerned with maintaining real democracy, fighting against lobbies, Big Brother and oligarchs, reducing gap between poorest / richest, I'm still optimistic about US potential because their history shows a constant capacity to rebound.
      imho USA has not lost its power. It is gradually losing its status of super power. It's not exactly the same.
      Besides, why isolate them?
      You think we are doing better in Europe maybe? With laws decided from unelected people in Brussels???
      Is that what you call a better democracy?
      In US they have Democrats and Republicans.
      In France we have the left and the right.
      You think puppets are not the same?
      You think the game is not a global fight for democracy and the survival of the middle class against a worldwide web of oligarchs manipulating politicians? I don't. It's a western civilization issue as a whole, to me, to keep our democracies, our middle class, and some active brain cells working in the people (see what Orwell thought about this) even if US has its specificities, of course. Now I also think that you are right if you isolate US government and its actions over the world from US as a country.
      Most likely is US are going to be more and more isolated, lose a good part of their global influence, but probably will still do well as a regional economic and cultural power.

    2. Hubert du Haut,

      The French like to complain and argue? YES. However there is no complain on my part. I am just stating an opinion and not complaining. As long as America doesn't reduce my freedom in any way or shape I have no complaint.

      By the way The European Parliament is ELECTED by the people in each countries through party-list proportional representation. These are NOT "unelected people".

      However this is not what we are talking about. We are talking about the power of the United States of America in the world and the effect of the weakness of its power on interest rates, the USD, GDP...

      Is America going to stay a REGIONAL economic and cultural power? OF COURSE and I never say it would not. When I say it is dead it is as a Superpower. America will join Russia, Germany, UK, France, Rome and other superpower at the time and go back to a more appropriate level. I will not argue here why this is happening. I just use the words "greed and arrogance" in order to understand the human reasons for the fall.

      Lastly, YES we have to make a difference between America government(S) and its people. However for a democracy to survive the people has to have the will to keep it alive.
      When was the last time you saw people in the streets of America? Check France (or Europe in general) and you see the difference. American are more interested by their TV shows than anything else...
      A "NSA" story in France would have drawn hundred of thousands of people in the street and general strikes.
      Are the French (or European) better citizens than the American. I would say YES and just because they still express their opinion through demonstrations and strikes and if you have followed the events in France in the last 30 years you know that many proposed laws by the French governments have been withdrawn under pressure by the "streets". When did this last happened in America?
      One point we agree: Both sides of the Atlantic are in big economic trouble and this is what is important for us here.


Note: Only a member of this blog may post a comment.