What’s Up, What’s Down: Higher Dollar, Sharp Lows for Gold
Comments for Monday October 20, 2008
Looking Ahead to Today By Reflecting back at Friday’s price action
CURRENCIES:
“Against the Odds, Financial Crisis Helps Stimulate the Dollar”, this was the headline of today’s Wall Street Journal’s The Outlook column, written by Joanna Slater. The euro and Swiss franc continue to be in downtrends at this time, as well as the pound and Aussie dollar. The Canadian dollar did close higher Friday, but is still in a very bearish downtrend. To me, it appears the Japanese yen could be the contrary currency. Yen futures could be in a large bull triangle but also looking toppy. Still, the long term trend is higher at this time. Since currency futures are dollar-denominated, a long Yen/Short Euro spread should be looked at.
The Dollar Index futures contract seems to be in a small bull pennant acting like it will soon test its contract high. If you’ve never traded the Dollar Index futures, but gravitate towards the currency markets, this is an instrument you really need to study. Unlike the individual currencies, where you go long futures when you’re bearish on the U.S. dollar, with Dollar Index futures you go long on the contract when you’re bullish on the U.S. dollar.
In other markets…
GRAINS:
Higher settlements soybeans, bean meal and bean oil, Minneapolis, Kansas City and Chicago wheat, oats and corn while lower for rough rice. The entire wheat complex continues to be in a major downtrend not affected by today’s higher closes. Corn settled sharply higher now in some resistance also still in downtrend. Next week could be important if there is a good follow through. Rice made a new recent low close continuing to look exceptionally weak. Higher closes again for the bean complex which could mean a retracement rally is on the way. However, the long term downtrend is still in tact.
MEATS:
Higher for live and feeder cattle, lean hogs and pork bellies. Cattle The feeders gapped higher and now are in a position to turn around although still too soon technically. Cattle need to show me more for the downtrend to be over. Bellies gapped and settled sharply higher with little above until its resistance area between 9000-9250 area and little support below basis the February contract.
METALS:
Sharply higher for copper, sharply lower for gold and lower for silver and platinum. Copper settled sharply lower again making a new contract low and close. Gold closed sharply lower giving me a sell signal reaching my first objective at the 800 area basis the December contract. Gold normally would be in a bull market when things are going bad overall but the need for cash has driven many people, etc., holding gold to sell out. Silver also settled sharply lower again making a recent low. Platinum also settled sharply lower not holding a critical area making a new contract low and close.
SOFTS:
SUGAR: Sugar closed higher but that hasn’t changed its downtrend or downward momentum.
COTTON: Cotton closed higher but still in a major long term downtrend of which today’s action hasn’t changed.
COFFEE: Coffee settled higher and has held in a critical area so far but still is in a downtrend and in a bear triangle.
Rick Alexander has been a broker and analyst in the futures business for over thirty years. He is a Vice-President for Sales and Trading at the Zaner Group (www.zaner.com) a Chicago-based futures brokerage firm. If you would like a free booklet explaining the charts mentioned above, email Rick at ralexander@zaner.com.