Get ready for an explosive move
FX:
Two weeks ago we presented the chart below to reverse our
previous EW interpretation of the dollar by taking in a more bullish
interpretation which was contrary to the rally we forecasted in gold for the
month of September. Admittedly, a simultaneous rip-roaring rally in both gold
and the dollar put us on the sidelines for two weeks until we were able to see
the wave counts more clearly.
As such, we pointed out the “Key” level which if taken out
would confirm it was “wave 1” up with a “wave 2” pullback before an explosive
move in “wave 3.” The past three day’s have seen another modest pullback and
today’s payroll data seems to be the excuse for an end to this correction.
Readers will recall that the huge rally in gold this month was
the main culprit in expecting further dollar weakness during the September Slide
period. But we have been tracking gold well for some time, recognizing that the
yearlong consolidation was a massive “ABCDE” type “wave IV” pattern. Triangle
breakouts are usually very technical and the price objective here is for a move
to $480-$500. As we said on Tuesday, we expected the recent pullback to $460 to
see a subsequent rally to $480, which is now underway. But when gold terminates
this breakout move, we think the US dollar’s rally will gain hurricane force
winds.
Stocks: The correction we
were looking for can be considered over as of yesterday. A further decline is
now expected. Only a move above 1,230/36 negates this outlook. Meanwhile, it
will take a move below 1,205 this week to see a technical breach for subsequent
selling pressure. As such a move back to these lows could encounter yet another
bounce before finally taking out this critical support.
Bonds: No change: The
10-year note has rallied to 4.3%. But as we have said for months, only a move
above 4.6% would be bearish for the 10-year note. We do note that a move above
4.4% would be the first step.
Regards,
Jes Black
FX Money Trends
613 4th St Suite 505
Hoboken, NJ 07030
Tel: 646.229.5401
Jes
Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior
to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.
Jes
Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.