"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


Wednesday, November 26, 2014

US Dollar Relieving Overbought Condition

(Please note that this article is taken from www.traderdan.com).

It is no secret that the currency flavor of the year has been the US Dollar. King Dollar has reigned supreme over the Forex markets especially since this summer when it began a torrid bull move higher breaking out above 81 and making a run to near 87 before it caught its breath and backed down a bit. It decided to run some more, this time to 88.50 before again pausing.
Right now, the currency markets are rather subdued thanks to the US holiday ( don't blink however because it all might change!). There has been some movement in the major crosses but not that much to speak of in terms of anything significant. It seems that for the moment, traders are content to let the various pairs meander in some tight ranges.


In looking over the chart of the US Dollar Index (USDX), the currency unit seems to be consolidating in a tight range between 88.50 on the top and 87.50-87.25 or so on the bottom.
I have drawn in a shaded rectangle to denote the region where it is encountering some buying.

If you look down at the indicator on the lower plot, you will see the RSI or Relative Strength Indicator, an old but helpful measure of buying or selling internals. Note that since the strong bull trend started in July, the RSI has ranged exactly where it ought to range for a market in a bullish posture - it has not dipped below the 40 level ( see the lower dashed line).


To show the strength of this move, look at how long the RSI has remained above the 80 level, which is considered overbought.

The recent leg higher has produced a negative divergence ( higher high on price not confirmed by a higher high on the RSI) but the market thus far is unconcerned about this, so we will also remain unconcerned. We know this because the lower part of the range remains intact.


The market appears to be working off the overbought condition by moving sideways, allowing the RSI to fall towards the 40 level ( see the shaded rectangle on the RSI insert). The longer the Dollar can move sideways with the price remaining above the support zone on its plot AND the RSI remains above the 40 level ( and the rectangle), the more the odds increase that this is just another pause before the next leg higher in the US Dollar. Traders will want to monitor this closely the next week or so.

If the Dollar were to fall through its support, we would not want to see the RSI fall below 40. That would introduce some doubt as to the staying power of the current leg higher and would bode for a deeper correction. Let's keep an eye on this.

Those who are actively working gold, especially, will want to monitor this most closely.


  1. Thanks for the USD update and for providing the details of reading and interpreting the chart. On a side note, gold just took a $11.00 hit and silver a $0.40 hit this evening. Since I haven't seen any news to support this, I guess this is an example of the markets being easily pushed around due to thin trading during the holiday I guess. Also, Have a Great Turkey Day tomorrow!

  2. Thanks for the turkey day post Dan. Happy Thanksgiving!

  3. Dan

    Thank you for your commentary.

    I want to re-introduce with you, the concept of the "Black Swan". Known author Nassim Taleb explains this concept fantastically here http://www.businessinsider.com/nassim-talebs-black-swan-thanksgiving-turkey-2014-11 . Yet where the confidence for the Turkey is ever rising for 3 years eventually the Turkey meets his maker!

    So for the last 5 months confidence in the USDX has been rising. Deflation seems to be the fear. Yet now that we have West Texas Intermediate oil now trading with a 71 handle how much longer will the US balance of trade look as good as it has during the last few months? Could we yet have (as shown in the diagram) a “Black Swan” event, where the dollar collapses? These questions and answers are for us to divine. Or does the USDX continue to march ever higher ad infinitum?

    Happy Turkey Day too!

  4. OPEC has spoken. Nasty spike down.
    It'll be interesting to see what happens after that initial reaction settles down.

    Thanks for the post TD. The USD is far more likely to hit 100 before it hits 70 as predicted by some.

    Happy Thanksgiving to all.

  5. DPH Could you please enlighten us all as to the "Why" the USDX will hit 100 with collapsing oil prices?

    1. Hi Nich...I have no empirical data I can provide to prove that. It's an opinion, nothing more nothing less.

      The point being, given the trend in the dollar and the shifting energy landscape whereas the US will eventually start to peck away at their debt burden it seems to me that the USD will strengthen going forward as opposed to weakening.

      I don't see the USD weakening given the trend we're just starting to witness. The amount of current and future oil or natgas revenues the US will take in will not weaken the dollar imho.

      I clearly can be wrong about this, no question.
      Do you think the increase in overall US oil export revenues will weaken the dollar long term when significant domestic oil revenues were never part of the equation until 5 or so years ago?
      I'm always interested in others viewpoints so anything you might share is appreciated.

    2. DPH

      That's the point. Fracking oil isn't profitable in the $65/barrel region. Refining oil from Western Canadian Tar Sands & US shale oil are way more convoluted / difficult to extract than simply drilling a well in the ground like in the Saudi desert. So supply will naturally shorten up. We'll get a boost for sure to the economy / consumer with current pricing but with the bullishness on the USDX at decade highs I see little upside from here for the US dollar. In fact I am positively bearish at these levels. I sense the USDX could be forming a head & shoulders pattern to head lower.
      I think at current pricing we may see the US balance of trade alter over the next few months and not in the way you had hoped. No one sees that coming. The point of the recently new US / Canadian oil revenues is that it needed the new techniques but with that it, it also needs a high oil price to be economic. The cheaper oil no doubt benefits the world’s consumers for sure. I’ll not argue that. I see the US oil producers not pumping nearly as much oil at current price levels as $20/barrel higher. So your hope that the USDX staying strong with weak oil prices probably won’t work longer term. At the moment the US economy is the cleanest shirt in the laundry pile but it’s still in the laundry pile! Of course all of the above is my opinion too.


    3. Good stuff Nich...thanks for the feedback.

      Just to be clear...I don't "hope" the USD stays strong based on any UScentric pride or bombast etc.
      I'm just looking at it from the current pecking order that exists that still has the USD as a safehaven of first resort.
      If the EUR,Yen, Ruble or Yuan etc were in that catbirds seat (the Yuan might be someday) and they all had some type of new oil revenue that would effect their strength going forward I'd be commenting on them also.

      Who knows...someday when or if the yuan rises to supremacy and they undergo a significant energy transformation that brings in significant revenue we might find ourselves commenting on the RMB.
      I would think that once China develops their own fracking methods and industry that it'll have a big effect on them and the yuan also if China is also awash in shale oil.

      For the record...I see fracking as enviromentally sloppy and a negative future consequence arising from it.
      But as of right now it is what it is.

    4. DPH

      Always remember stocks / commodities / currencies are weakest at the top and strongest at the bottom. While everyone feels comfortable buying at the top no one feels safe catching a falling knife. Over the long haul Buffet and value investing has proven more reliable than momentum chasing. The highest volume month in 2007 for the S&P500 was August. Two months later was the peak & downhill from then. However, you are right. It is what it is..

  6. Dan,

    Any chance you'll reduce your monthly fee to around 9.99/month? Paying $300+/yr is a lot for a person who has a family.

    Thanks for all that you have done.

  7. Oil's collapse is surreal. How low can it go...

    1. 66 would be the mlh inf of a downwards pitchfork weekly time scale, then 60 bol inf 100 monthly time scale...60 seems to be a nice support area, but...

  8. Russian finance ministry official says considers scenario of $80/barrel in the coming years as moderately optimistic

  9. This collapse in the oil price could be called a "White Swan" ?

  10. NYMEX crude closed at 68?

    Must be a holiday

    1. My bad. The 6 handle is real based on the open decision. Interesting to see the inferred blame.

      Maybe this is a way to fight ISIS. Although I wouldn't want to see the administration take credit.

  11. Notable milestone...

    "China Surpasses Japan as World’s Second-Biggest Equity Market"

    By Bloomberg News
    November 27, 2014 8:31 PM EST

    China surpassed Japan as the world’s second-largest stock market for the first time in three years amid growing investor confidence that policy makers in Beijing will revive the economy with monetary stimulus.

    China’s market capitalization climbed to $4.48 trillion yesterday after a 33 percent increase this year, according to data compiled by Bloomberg. Japan’s slipped to $4.46 trillion and has dropped 3.2 percent since the end of December. China was briefly the second-biggest market, behind the U.S., in March 2011 after an earthquake in Japan sent shares tumbling in Tokyo.

    While the weakening yen played a role in Japan’s shrinking market value in dollar terms, the Shanghai Composite Index (SHCOMP) has climbed three times as much as Tokyo’s Topix this year....(cont.)


  12. It seens like Draghi and Co. have really started amping up the rhetoric what their intentions are.
    So...are they merely jawboning again or are they clearly telegraphing the market what they're about to do? They can't B.S. forever.

    December 4th would seem to be an important date.
    Draghi Pledges Open Mind on Asset Buying as Price Pressures Wane

    By Alessandro Speciale and Kati Pohjanpalo
    November 27, 2014 9:53 AM EST

    Mario Draghi said the European Central Bank is open to buying a wide variety of assets for further stimulus as German and Spanish inflation data highlighted the struggle to revive the euro-area economy.

    If current measures aren’t enough, the Governing Council is “unanimous in its commitment to use other unconventional instruments,” the ECB president said at the University of Helsinki today. “What assets? All range of assets. At this point of the discussion, the discussion is quite open. It’s been going on in several meetings.”

    Draghi’s comments come as the 24-member Governing Council enters a week-long quiet period on monetary policy before its Dec. 4 meeting. Officials over the past several days have signaled that they’re working to get stimulus tools ready as soon as possible, including full-scale quantitative easing...(cont.)


  13. Central banks buying practically their own bonds, buying regional stocks and foreign stocks is nothing knew since the US laid the current groundwork while waiting for a recovery that never comes. Japan might be an exception being the US's whipping boy or rug that everything is swept under.

    The US$ chart would be called stair stepping. A very strong chart formation.

    It is not so much a glut of oil, although it helps, that is driving oil prices down but a hobbled world economy and green energy making inroads not counting nuke energy which is the most expensive and dangerous of all electric generation. I would think the price stays down below a $100 for a decade or two.

    Oil traded in the US$ makes for even more interesting possible scenarios that could occur. Oil down US$ up, tough on foreign buyers.

    California finally going to get its first El Nina/Nino rains next week. If subtropical moisture mixes in with cold fronts, the snow pack will be heavier than normal (Sierra cement) i.e. a larger moisture content during the winter snow pack buildup. Much needed relief.

    1. Making my periodic Interstate 5 trek. Lots of almond trees dead and being harvested for firewood. Hope to report more details later.

      IMHO the rain will mostly hit Northern California. Good for Lake Shasta and the Sacramento River but need more to go South.

    2. I'll be in mammoth enjoying that snow pack.

  14. I expect to see gas 10 cents cheaper within days. KaChing says the consumer. Zoom zoom zoom says the XLY.

  15. The oil story is so interesting today that I hadn't even noticed how silver has once again fallen out of bed. But not as bad for gold. So, what's the theory? Cheaper energy to dampen demand for silver in solar panels, perhaps?

  16. Gold will rise next week in spite of collapsing oil prices and failed Swiss gold initiative. Gold shares once again at incredibly cheap levels. Bold ones are alternating with JNUG and JDST making huge profits. It's now JNUG' s turn, for big boy profits, but exit quickly with loot in hand.

    1. For this Christmas season, there is at least 3 Wisemen on your side.

      Today, Martin Armstrong says, “We should see a pop in gold going into next week.”

      On November 24, Mr. Tatro stated that Gold will now go up with the dollar; even though people think this is impossible it will happen.

      And earlier, even General Jim, has stated the Swiss vote could have positive implications on Gold.

      Ok Peter I give up, you’re right, Gold is going to rocket launch Sunday night.

      Besides the Swiss vote, I wonder what else is already scripted in for the cover story of it’s Sunday night launch?

    2. amstrong will have to swallow that pop after todays sell off

    3. General Jim. Duh. Listen to him if you have a financial deathwish.

    4. Perhaps in the days of the last Roman Empire, not all gifts from the 3 Wisemen were actually in the infant's best interest.

      In my opinion, even the star was in a "fallen" condition.

      Jasper, I agree, the General has let us down a bad road.

      And, I'm puzzled why Armstrong appears to have changed his mind on Gold's reaction to the Swiss vote...at least short term wise.

    5. 1.05 for trx it will soon lose another 50 cents.

      Im amazed Sinclair didnt post any pictures of turkeys that "deeply enjoy to be slaughtered".

    6. Jasper,

      $.55 to $.62 cents a share might??? be a bargain if trx survives as a junior the current cycle low working itself out right now. But with the General in charge, it would be an awful risky bet. I wonder if the General is still wearing any stars yet?

      I'm considering taking a chance on GDX if it goes somewhere under $15 before X-mas.

      If a cycle low in Gold is near, then the miners should do well until Gold tops out again...especially if Gold & the dollar rise together for a period of time.

      My sense on this is that Gold's current cycle low will arrive before Christmas. Of course, I could be wrong and it could get ugly after the first of the year..

      If the metals doesn't "pop" higher Sunday night following into Monday’s trading session, then maybe a new low under $1130 is coming soon.

      For a few minutes of Dan's crystal ball, I’d be willing to hand Dan the cost of several years of membership dues to see if a cycle low is coming before the first of the year.

    7. I recommend you stay away from trx shem. Its not being run for the benefit of the shareholders, management cant be trusted to tell the truth about the simplest things and its fundamentally worthless. Good chance its going the way of the dodo.

  17. India has revoked 80:20 import restrictions because of oil price fall leading to reduction in imports. Maybe the 10% tariff will also be reduced as its effectiveness is eliminated by gold smuggling.

  18. Gold and silver nosing down as the decline in oil revenue starts impacting commodities overall.
    The fact oil tanked and it's a friday market day on top of it, it seems possible that the gold Swiss referendum is also starting to weigh on those long gold who feel they should head for the exit doors before a "Nay" vote.

    Sunday nights PM trading could get u-g-l-y after the Swiss vote is announced earlier in the day at 7 a.m. ET.
    I think that it's a given that we retest the lows in gold and silver if oil continues it's slide and the Swiss Miss happens.
    But....if a massive ECB QE-like program is announced or happens in early December then those lows might not be reached due to it. Tough to say.
    Overall, it's starting to get very interesting again.

    1. That nay vote is already priced in my opinion.

  19. The USDRUB hits 49.90 due to oil price weakness and their reliance on oil export revenue
    "Bank of Russia moves to stem slide in ruble"

    By Andrey Ostroukh
    Published: Nov 28, 2014 9:47 a.m. ET

    MOSCOW--The Bank of Russia said Friday it would extend limits on currency swaps in an effort to stabilize the ruble, after the currency hit a record low against the dollar.

    Earlier this month, the central bank set a daily limit of $2 billion for currency-swap operations, where banks receive rubles from the regulator using dollars and euros as collateral. This tool drew demand only recently after the central bank withdrew a large chunk of rubles from the interbank market as a result of $30 billion intervention in October.

    By extending the limit for the next two weeks, the central bank said it hopes to deter speculators from betting on a weaker ruble.

    On Friday, the ruble hit an all-time low of 49.90 against the dollar, after the Organization of the Petroleum Exporting Countries decided on Thursday to keep its production ceiling unchanged at 30 million barrels a day.

    OPEC's decision prompted a slide Brent crude oil prices to below $72 a barrel for the first time since mid-2010. The sharp decline in world oil prices poses a substantial risk for Russia, the world's third-largest oil producer, as the government depends on oil and gas sales for around half of its annual budget revenue.


  20. The results will be released Sun. 7:00 a.m. EST
    "Swiss Go to Polls on SNB’s Gold, Immigration in Economic U-Turn"

    By Catherine Bosley
    November 29, 2014 7:01 PM EST

    Switzerland holds three referendums today that have the potential to have an effect on everything from the economy to the central bank and even the country’s international relations.

    Swiss Gold Vote to be 'Leash' on Central Bank:
    Up for a vote is a requirement for the Swiss National Bank to hold at least 20 percent of its assets in gold, a clampdown on immigration and the abolishment of tax privileges for foreign millionaires.
    While polls by gfs.bern indicate all three proposals could get rejected, there remains a sizable cohort of undecided voters.

    Plebiscites are a key feature of Switzerland’s system of direct democracy...(cont.)


  21. The effect on the EURCHF should be interesting one way or another after that Swiss vote.
    My guess is it's "Nay" 60/40 but hey, ya'never know.
    "Swiss vote provokes '6,000-year gold bubble' attack"

  22. Swiss gold initiative...
    Huge "Nay"....78/22%


    There's been a lot of teeth gnashing and hyperbole wasted on this latest never ending string of gold bug hopium.
    What will the spin be out of the golden bunkers of doom that hitched their wagons to the Swiss Miss?

    Let me guess....the vote was rigged! Ha!

  23. More...

    Swiss Reject SNB Gold Initiative, SRF Projections Show

    By Catherine Bosley
    November 30, 2014 7:18 AM EST

    Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hamstrung the economy.

    The proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold was voted down by 78 percent to 22 percent, according to projections by Swiss television SRF as of 1:00 p.m. local time...(cont.)


  24. DPH;

    I heard it went nay 70/30

    1. Loren, the millionaire tax break kind of suprised me but only because I'm an average guy.
      I suppose some might look at it like a Swedish opportunity to stick it to the rich guy/gal and soak them for some taxes.
      But the more pragmatic Swiss citizen ( who strike me as modern and sophisticated) thought differently and realized where their bread is buttered.
      It's buttered with foreign investment.

  25. Swiss to keep millionaires' tax breaks, projections show

    Swiss voters elected to keep a 152-year-old tax break for rich foreigners that is in force in Geneva and other wealthy areas, according to projections from Swiss television SRF.

    Sixty percent voted against an initiative, sponsored by the Socialist Party, that would have abolished the system allowing foreigners to duck income and wealth taxes by negotiating lump-sum payments with Swiss cantons, while 40 percent were in favor of the proposal, according to SRF at 1 p.m. in Zurich.
    Swiss reject tighter immigration limit, srf projections show


    Swiss reject tighter immigration limit, srf projections show

    Voters turned down the initiative known as Ecopop by 74 percent to 26 percent, according to projections by Swiss television SRF at 1:00 p.m. local time today.

    The measure "Halt Overpopulation -- Preserve the Natural Environment" would have limited annual immigration to just 0.2 percent of the country's permanent resident population. Polls, including one by gfs.bern, had forecast the initiative's rejection.

  26. The devil?!?!

    Really? :-o


    1. That guy is insane as is the average poster on that site.

  27. Oh, maybe only 77-23. Sorry to pile on with that extra point worth of snark.

    1. That's funny actually.
      It just goes to show how much bluster and bombast has been invested by some who sought to turn this whole Swiss gold thing into something much larger then it was or ever could've been.
      All the folks who believed/hoped that this SGI was "thee" black swan they desperately needed to see happen were completely misguided.
      They're always looking for some type of distractive angle in order to move away from the old, wrong prediction.

      What's next? Collapse of the oil price ushers in the end if the petro-dollar and the derivatives market overall?

    2. Yeah, that's it.

      High oil prices = Doomsday
      Low oil prices = Doomsday
      Fill in the blank = Doomsday

  28. The same derivatives collapse drama that never collapsed back in 2008-09 when oil hit the high $30's is not going to happen this time around with oil in the $60's?

    Why would it? I'd like to see the logic behind that assertion instead of the doomer/anxiety level coming out of some people that's dramatic enough for others to become emeshed in.

    Gold will break $1100 at some point if the trend we're watching stays on course. One look at at10 year gold chart tells you at this point it' probable.
    The continued denial of that possibility is a gold fever bias that borders on delusional at this point.

  29. Silver just puked. I was wondering if tonight was the night we see 14.99, and suddenly it just cut right through it like butter. 14.55??

    I'm not sorry for anyone though. They had three years of fair warning.

  30. Kitco says the flash low was 14.09. Wow.
    A bunch of the "BTFD" guys just lost a buck in minutes.

    1. Yeah, I saw that $14.09 also but didn't see it on the chart.
      Looks like a little bit below $14.50

      The reaction in the London market should be interesting for gold in particular. You'd think it would drop again or react negatively.
      I guess we'll soon find out.

      Sub $1000 gold doesn't seem too farfetched at this point when you see what the hype and expectations can do to the price so quickly.

      If peace suddenly broke out in the
      Ukraine I think we'd slice through $1100 like it wasn't even there.
      Sub-$60 oil might have the same effect at some point.

  31. Scary stuff here for the 'bugs. $600 gold and $5 silver anyone?


    1. Anything is possible. The trend is down, that's all I know for sure.

  32. Good thing I can get $5 (Canadian) for my maples...no matter how low it goes. Looks like quite low volume for a drop like this. Looks like NOBODY was interested in buying silver $15.50 to 14.50.

  33. maybe the markets are smarter than all of us, and forward looking too. i remember hearing that somewhere. so gold peaked long before QE ended. maybe gold did rise with inflation expectations, but QE only really kept us out of a much deeper downturn. i hope for the sake of the world's economy that the precious metals, energy, commodities in general aren't predicting a deep depression. i have to believe that even the central banks must be getting quite nervous now. i doubt they want the metals to fall any more from here. deflation, or even expectations of that tend to be terminal to an economy - just look at Japan.

  34. Silver breaks $15 so set for a trip to $10. Gold was always going back to the $1,000 area. Once noticed that currencies are no better than gold or silver, the metals recover and start the trek back up. Anywhere from 3 months to less than a year for a bottom to be put in.

    Oil is just fascinating. Between $30 to $60 then cutbacks on exploration and drilling for money savings will show up but even with that, next year projections for US production calls for 20% more out of the ground even with cutbacks.

    Was getting takeout last year and the counter girl said she hadn't done xmas shopping yet. I said the real xmas starts after the 25th. Her immediate response was, "What do I tell my 3 girls?" (all under age 7). Told I didn't know but might have some new kids clothes for them she could have. Saw her next a day or two after xmas and gave her the items and said to bad it was late. She said prices were already 50% to 75% off on after xmas sales and clearances and had discovered the 'Day Of The Magi' to cover for a late celebration with her girls. Her Hispanic roots probably made that celebration a bit more satisfying.

  35. And now metals are higher. Twilight zone action overnight. Silver with flash crashes in both directions. That should give the commentariat plenty to jibber jabber about. Both sides have their talking points. "Way up off the lows!" "Way down off the highs!"

    So is this it? Is this the "final low" the idiots have been blathering about for three years? Anything is possible, but the odds don't support it. The trend is still down.

  36. Man this volatility is making me c r a z y

  37. Gold rises dramatically, just as was counter intuitively predicted. JNUGERS get ready to party, but don't hold for long. Eric, were you there, or are you still moping over your unpurchased airline sticks? Good news for gold is that all obstacles are out of the way, with Injuns now on the warpath. No more government intervention, as they must surely want a higher gold price, with deflationary fears, and too strong dollar. Throw away your training manual!

  38. My 5 predictions for Harry Dent:

    1. That he will spend a great deal of money on advertising.
    2. That he will be wrong on almost everything he predicts.
    3. That he will have an excuse for every wrong prediction he makes.
    4. That he is looking to catch a wave by making wild statements.
    5. That he doesn't actually know whether he is coming or going.

  39. We have lift off! We have lift off! Gold pops above the magic number of 1180. This could be trend change and the bottoms are in - yet again - when we thought that only British public school types were so obsessed with them.

  40. Gold now nuzzling $1200. "Yummy, yummy, yummy," says gold, "I've got luv in my tummy."

  41. Gold bursts through $1200. Everybody wrong as usual.

  42. It's awfully lonely and dark in here. I think the lights have gone out. Peckerwood, are you there?

    1. Its a hard pop into resistance closing the gap in gld. Not confirmed by the miners. I dont think much of this.

    2. i think you have things handled Peter! :-)

      i do wonder if gold finally bottomed though.

      one thing i can say is the computer algos have a huge advantage over human beings. they have no emotion. i have never seen markets get so overbought and oversold. next you feel like jumping from the roof, throw your computer off instead.

      this time is different folks, well at least in magnitude. well, i am busted anyway. but i cannot help but watch this insanity.


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