DXY

The dollar has reversed sharply, averting a nerve-racking test of a long-term trendline that comes in this week at 92.13. DXY got no lower than 92.47 in the most recent down-cycle, and the last time it touched the trendline was three weeks ago at 91.70. The day's rally was not powerful enough to lead bulls out of the woods. but it  has somewhat lowered the odds of a major breakdown.  Prospects would further improve if the nascent surge generates an impulse leg on the daily chart. That would require an explosive rally exceeding 96.40 at a minimum, but it wouldn't be much of an impulse leg, since the external peak at that price  (7/10/20) is small potatoes.  On the less important hourly chart, it would take merely 94.11 to re-energize the short-term picture. That;s equal to an 'external' peak recorded on 9/30 on the way down. ______ UPDATE (Nov 1, 10:02 a.m.): Wouldn't ya know it! The little devil topped at 94.10 last week -- close, but no cigar. It looked primed to succeed nonetheless, although the pullback this will have required counts as a mild discouragement of the idea that the rally is destined for big things. ______ UPDATE (Nov 5, 9:27 p.m.): The rally has come suspiciously from two ticks above the in-your-face low at 92.47 recorded on  10/21. If it is not a strong one, look for a relapse to the 91.75 depths of September's abyss. _____ UPDATE (Nov 8, 9:45 p.m.): The rally that got off to such a promising start on 9/1 has fizzled, so I am going to remove this tout to make room for more interesting fare. I will continue to track the dollar nevertheless with occasional posts, although not on the front page.

I've returned to the long-term chart, which shows a trendline that precisely foretold the so-far modest 3%  rally begun in early September from 91.75. It's plain to see that the Dollar Index will retest the line, which comes in around 92.13 this week. I expect the support not only to be reached, but to be at least slightly exceeded. That would not necessarily doom the dollar, but it could conceivably trigger a strong snap-back rally once bulls have been shaken out. Alternatively, if weakness continues below the trendline, my minimum target would be 91.72, and thence 90.20, and finally 88.69. These are Hidden Pivot levels that come from a bearish pattern shown in this weekly chart.

Two strong rally legs last week failed to push the Dollar Index to p=94.01 . The upthrusts also choked on a fine opportunity to surpass some challenging external peaks, the first of which lay just a tick above Thursday's high. This is unencouraging, but because DXY is on a theoretical  'buy' signal tripped last Tuesday at the green line, we'll give bulls the mild benefit of  the doubt for now. It would take a two-day close above 94.01, however, to put D=95.00 in play. However things play out, you can count on gold and silver quotes to remain exquisitely and inversely sensitive to every uptick/downtick in this vehicle. _______ UPDATE (Oct 20, 6:11 p.m.): Yet another day of weakness wrecked the short-term-bullish pattern when DXY took out its point 'C' low. There has been hardly a bounce, so we should prepare for even lower prices in the days ahead. ______ UPDATE (Oct 22, 12:05 a.m.): The dollar looks so atrocious that just a couple more bad days will wipe out a rally begun from 91.80 on 9/1 that looked like a plausible beginning for a new bull market. Here's the chart.

The dollar's retracement from a 94.74 high recorded two weeks ago seemed healthy and normal until Friday's dive. Just a little more weakness on Monday or Tuesday would generate a bearish impulse on the daily chart if it penetrates the 92.70 low shown in the chart.  Although this would not necessarily signal the start of a major new downtrend, it would imply that it could take time -- perhaps 6-10 weeks or even longer -- for the dollar to carve out a bottom capable of supporting the moon shot that eventually is coming. I see this as inevitable because a strong dollar is the one thing that almost no one wants. It would deaden stimulus, kill the profits of U.S. multinationals and catalyze the start of a ruinously deflationary squeeze on debtors. _______ UPDATE (Oct 13, 2:08 p.m.): Because the dollar has been falling for nearly three weeks, and because it has reversed from a too-obvious spot just above mid-September's consolidation lows, we'll be careful about turning bullish prematurely. Let's stipulate that the rally continue unpaused to at least 94.04 before we switch our bias. That would put p2=94.50 in play (60-minute, A=92.75 on 9/21), with additional potential to D=95.00 over the next 4-6 days. Here's the chart.

Traders spent the last half of the week torturing each other for who-knows-what reasons. The downtrending pattern is too ugly, and the one-off 'A' too puny, for a precise call on further weakness, but we can still use the 93.34 target, since it is good enough for government work. That means Friday's fleeting rally to the green line was a 'mechanical' shorting opportunity, which further implies that 93.34 is likely to be achieved. If so, this would give bullion at least a little buoyancy early in the week. I wouldn't count on much more than that, however. _______ UPDATE (Oct 5, 5:40 p.m.): The bounce came from three cents above my 93.34 target, but it was not sufficiently robust for us to presume the correction begun from 94.61 on 9/25 is over. Set an alert at 94.04 if you want to be confident the trend is changing. _______ UPDATE (Oct 6, 8:40 p.m.): DXY took a strong leap from 93.34 on a retest, sparing anyone who was long in gold or silver a nasty surprise.  The rally would need to pop above 94.34 to turn the chart bullish again and put a 95.33 target in play. Here's the graph.

The Dollar Index poked tentatively above a Hidden Pivot target I'd flagged at 94.61 on Friday, but bulls will need to put a little more gusto into it to show they are capable of taking DXY to 100 and beyond. To be sure, September's steep rally has earned a rest. But if new multi-year highs are coming, the pauses should be brief if not necessarily gentle. Indeed, a steep dive followed by an equally sharp recovery would be the best evidence we've had to date that the rally is for real; that's how bull markets behave. In the meantime, we'll take the smaller, bullish patterns as they come. The one in motion now,  begun from 93.93 on 9/23, target 94.85 on the hourly chart. It can be bought 'mechanically' on a pullback to p=94.52, stop 94.30; or to x=94.36, stop 94.18. _______ UPDATE (Sep 29, 4:19 p.m. ET): Bulls had an opportunity to turn things around, but the bounce from a distinctive Hidden Pivot target at 93.84 couldn't get past even a single 'external' peak. Now, the likelihood is that DXY will grope and stumble its way down to lows near 93.50 recorded last week. Alternatively, it would take a pop above 94.30 to reignited the bull trend begun on September 1.

Today's modest pop exceeded two more external peaks on the daily chart, bringing the total to three -- all by a rally that has yet to correct. This implies a powerful impulse leg in the making -- one that could soon dispel any doubts about the importance of the September 1 low at 91.71. If this is in fact the  start of a major bull move in the dollar, all of the trends that have been in motion since the bombed-out March 23 low are going to reverse:  Shares, including the FAANGs, will fall, the precious metals will turn weak and T-Bonds will get new respect as a safe haven.  None of this will necessarily happen overnight, but as the implications of the dollar's strength become more apparent, that will turn the tide. Debtors are headed for trouble, and the effects of Fed stimulus are about to go deader than Kelso's testicles. _______ UPDATE (Sep 23, 9:23 p.m. ET): This week's surge has exceeded two prior peaks on the daily chart, two of them 'external', without taking a breather. Now, if the rally punches through D=94.61 with little effort, that would further strengthen the argument that we are witnessing the beginning of a major move. _______ UPDATE (Sep 24, 9:47 p.m.):  Thursday's rally to within two cents of the 94.61 target I'd drum-rolled has the entire world on edge.  Exciting though this may be, it does not call for speculation; we'll let price action over the next day or two speak for itself.

I've been looking for signs that the upturn from 91.75 on September 1 is the start of a major bull run, but so far the evidence is inconclusive. The impulsive rally since then had a chance to demonstrate exceptional strength by surpassing the three 'external' peaks shown in the chart. In the actual event, it got past only the first before correcting significantly as last week ended. Bulls could make amends with a thrust this week that vaults the other two peaks, but until that happens, we should view the rally with caution, if not quite skepticism. _______ UPDATE (Sep 16, 5:25 pm.): The lack of follow-through to the rally begun on September 1 from 91.75 has been dispiriting, but don't give up yet. It would take but an unpaused thrust exceeding peaks #2 and #3 to change the picture dramatically. ______ UPDATE (Sep 21, 10:12 p.m.): With just a modest upthrust, the Dollar Index will take out two 'external' peaks, generating an impulse leg on both the intraday and daily charts. Its imputed power will depend on whether it can do so without any more pullbacks, even minor ones, and the move would be even more bullish if DYX doesn't trade beneath the higher peak (93.99) for at least a week or so after exceeding it. Here's the chart.

I've been a hard-core deflationist and dollar bull for decades, and so I've been eager to see technical evidence that the dollar's wrenching correction since March is at an end.  Alas, although there are faint stirrings in the greenback that hint of a short-to-intermediate-term rally, I doubt that it heralds the resumption of the dollar's long-term bull market. My expectation is that this will occur in conjunction with a deflationary implosion that will usher in a global economic depression. For the time being, though, the money spigot is wide open, fiscal stimulus is at unprecedented levels and few are worried about a ruinous debt deflation.  It is inevitable nonetheless because too many dollars are owed -- including more than a quadrillion of them tied to financial derivatives -- for debtors to slip the noose. The sum is vastly more than the piddling trillions being loaned or gifted to the financially strapped. And although no one thinks they or even the taxpayers will have to repay this money -- meaning it is ultimately inflationary, at least in theory -- the deflationary black hole created by a collapsing derivatives market and falling prices for energy and real estate will suck all debt into the void of singularity. Stochastic Blahhhs Concerning the Dollar Index, its last few, minor rallies have exceeded prior peaks on the intraday charts, and this is bullish. However, stochastic indicators do not suggest that a major reversal is at hand. Notice in the chart (inset) that DXY's descending lows since March have generated correspondingly descending lows in the weekly stochastic. Although this 'non-divergence' is not bearish per se, it is not the kind of chart action we should expect at a major low.  In contrast, notice how just before the dollar took off at the beginning of 2018, we