Why I think the Dollar Index is about to rally
FX: The euro
rallied like clock work right into our ProfitZone#1 in the 1.2000 to 1.2070
area. We booked another 1/4 of our position at 1.20 (we did 1/2 at 1.1953
yesterday) and are looking to exit the remaining 1/4 position at 1.2060.
We have
moved our trailing stops up to 1.1975. Once this “wave 2” bounce is complete we
expect a renewed selloff in the euro. We will therefore begin building back a
larger USDCHF long position in the coming days.
We are looking to buy USDCHF at 1.30/1.2950 over
the coming days. Recall that we took 1/2 profit on our long USDCHF positions two
Friday’s ago at 1.3130 as we expect a pullback to 1.2950/1.30 where we will
reposition long for a full position. Following a five wave move down we are
seeing a retracement this morning. The corrective process does not yet look
complete yet traders with no existing long positions may go long in our BuyZone#1
from 1.3050/00. We hope to see BuyZone#2 before pulling the trigger.
To clarify, we list below our trades with some
updated comments.
Jan 3: Short USD/MEX @ 10.63 — Looking to add at
higher levels possibly.
Jan 3: Long AUD/USD @ 07350 — Closed 1/2 @ 0.7525. Added at 0.7370 and booked
profit at 0.7435. Added again at 0.7370. Took 1/2 profits again at 0.7460
Jan 6: Long USD/CHF @ 1.2720 — Added at 1.2800. Then again at 1.2920, and again
at 1.3010. Took 1/2 profits at 1.3130 on Feb 17. Looking to add back in the
1.29/1.30 range.
Jan 9: Long USD/CAD @ 1.1660 — Added at 1.1415 for an averaged rate of 1.1575.
Riding lower.
Feb 24: Long USDJPY @117.07 — Looking to exit at cost this week or next.
Feb 27: Long EURUSD @ 1.1863 — Sold 2/4 at 1.1953. Sold 1/4 at 1.20. Looking to
sell 1/4 at 1.2060.
As we said for the past week, “If the 91.00
resistance holds we should see a pullback to 89.50 before higher” (see chart
below).
Recommended longs from 88.00. Added on a
sustained move above 89.50. Look to add more above 91.00.
Gold: No
change: Gold has failed to see a bullish resolution over the past week. A move
below $545 would be the first sign that we could perhaps break the $535 lows.
But until then gold is still pointed higher and the “ABC” type correction from
the $475 is looking like gold wants to run some more. The critical support is
now at the previous resistance turned support at $440/$435. That must be broken
to provoke more selling pressure.
We have recommended option protection for four
weeks for those that are long. We also said shorting on a break of trendline
support at $565 was a good trade for aggressive traders. We don’t like selling
gold but traders that are short from the break below $565 should place stops at
cost or just above the $574 highs.
Stocks: No
change: The market is setting up for a final move to MARGINAL new highs just
above the 1,300 level which would be a good selling opportunity.
As you know, we have been saying for weeks that
we must see a “five wave” decline from the 1,300 highs take us below the key
1,245 level (about 1252 in the futures). So if the market is supposed to top
then we HAVE to fall below 1,245 to get the downside moving. Otherwise the trend
remains in favor of the bulls. This is why we have said for three weeks that “We
still think traders can look to go short with risk limited to 1,300. But a more
pragmatic approach is to wait for a completed “five wave” move below 1245 to
confirm a top.”
Go short with risk above 1,300. Add to position
on a move below 1245.
Bonds: Yields
have moved higher in what appears to be recognition that easy money is coming
off the table globally….Our recommendation to sell at 109 is right on track
and traders could look to add to their position if this leads to a “puking” in
fixed income.
Last week we wrote, “We expect to see a bounce
(from support) followed by a sustained move below here which should really see
an increase in selling pressure considering that the speculators are heavily net
long. We have recommended shorts from 109 and noted that breaking key resistance
at 4.5%-4.7% could really ignite some selling considering that the market is
bearish on bonds but positioned the highest net long in 3 years.”
Recommended shorts from 109. Trailing stops
should be placed just above 109.15.
Crude Oil: We
look to be chopping higher in a “wave D” as we suggested we might see many
months ago. Our chart below from two weeks ago appears to be a good indicator of
what’s to come in the coming months ahead. More chop and flop followed by a big
rally. By the way, the final spike in oil will likely lead to a political crisis
of sorts….Just so you know…
As we said, “We have not changed our view that
the pullback from the “wave (III)” peak at $70 would see some sort of “wave
(IV)” correction followed by a sustained move to $80-$100. The only uncertainty
is how we were to get there. Therefore, as we said last week, “We see an
opportunity for those that are bullish to buy in the $60 area over the coming
days to weeks.”
Recommended long at $55 last November. Still
looking for a move to $80-$100 over the coming months.
***** NatGas is finally making a bottom after
flushing out some of the cherry pickers. The clear “five wave” move down to
extremely oversold levels with extreme bearish sentiment is the typical setup
for a rip roaring rally. Those who are looking to go long this market should
right now as it completes “wave 5” and is turning up.
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.