NYBOT Dollar Index

I'm not big on head-and-shoulders patterns because they are everywhere one looks for them, but if the one shown keeps pounding away at the neckline of this misshapen specimen it could trigger a two-point break.  Alternatively, buyers would need to drive DXY above the 77.95 external peak to regain the offensive. If weakness implies the euro is about to surge, the headlines that we should expect to accompany such freakish behavior are difficult to imagine.  Maybe this: Europe Goes All-In on Greek Debt.

Yesterday's rally looks promising because each of its two discrete thrusts created a bullish impulse leg on the hourly chart.  Meanwhile, the pullback from the intraday high at 77.25 is working on a second thrust without having gone impulsive as of around 12:35 a.m. EDT. This tends to corroborate a mildly bullish picture, at least for the moment. It would become more bullish still today if bulls can follow through with a push exceeding the 77.29 secondary peak from October 13.

We found quite a few signs to affirm the bullish case during last Wednesday's tutorial session, but to highlight just one of them, notice in the accompanying chart how each of the last three upthrusts created a new impulse leg.  This is the way healthy bull trends are supposed to move, and the Dollar Index's daily chart appears to be doing so with little effort.  Pushing past last winter's highs may require a running start or two over the next few weeks, but the evidence up to this point strongly implies that new recovery highs lie in the offing. If this is a true bull market in its infancy, the uptrend should be able to exceed last November's peak at 81.44 without correcting the thrust from July's 73.42 low.

Two compelling trends, both of them nicely visible on the 240-minute chart (see inset), imply that DXY is bound for a minimum 80.10 once it surpasses a lesser 'D' target at 79.17.  So far, the index has stalled within two ticks of that number, a Hidden Pivot midpoint resistance, but once above it the run-up to 80.10 would become an odds-on bet.  Lest we be caught without an even more ambitious target if buyers should run amok, here it is: 81.49 (A=74.68, B=78.86, C=77.31). At that point, the dollar will have rallied 12% from its early-May lows, but it would need to reach 87.50 for the 20 percenter that would qualify as a bull market.

Today's commentary concerns the apparent breakout of the dollar, but I'd like to elaborate just a bit more in this tout, addressing my comments to subscribers rather than to a general audience.  Specifically, the ambitious rally target at 79.86 that was flagged in the essay comes from the hourly-chart pattern shown. Although a move above the 'p' midpoint would confirm this, my gut feeling is that it will be a pushover.  Also mentioned in the commentary, but not shown explicitly, are several 'external' peaks on the daily chart that were recorded  in January and February. They lie, respectively, at  78.87, 79.17 and 79.60, and so any move that hits the 79.86 Hidden Pivot flagged above would infuse quite a bit of new strength into the bullish trend. _______ UPDATE (11:55 a.m. EDT):  The dollar is in the throes of one of the most single-day rallies in recent memory, hitting a so-far high today of 78.80.  The 79.86 target noted above remains my minimum upside objective for the near term, although I hadn't expected it to be reached so soon.

The dollar looks primed to move significantly higher, implying that U.S. stocks and precious metals will remain under pressure for the foreseeable future. That doesn’t necessarily mean Gold and Silver cannot continue to rise against all currencies nonetheless, since the global monetary blowout that has caused them to ascend for more than a decade shows no sign of abating. However, whatever strength bullion musters in the weeks and months ahead will in dollar terms be tempered at least somewhat by a resurgent buck. We recently called subscribers’ attention to a possible nascent bull market in the dollar via a trading “tout” that recommended setting a chart alert at 78.87, about 0.6 percent above where the NYBOT Dollar Index was trading at the time. Yesterday, the  Index spiked to within 3 cents of that benchmark, so officially the baby bull has not yet been born.  However, during an online tutorial session that we conduct every Wednesday morning, we had a powerful sense of déjà vu yesterday while looking at an hourly chart of the Dollar Index. (Want to be alerted in real time to these changes? Click here for a free trial subscription to Rick’s Picks, including access to a chat room that goes ‘round-the-clock, and to trading recommendations and analysis that are continually updated during market hours.)  The chart is reproduced above. The crucial piece of it, based on our proprietary Hidden Pivot Method, is the 77.52 peak achieved during Monday morning’s spike-up opening. Notice how that peak slightly exceeded an earlier one at 77.49, creating on the hourly chart what Hidden Pivot-eers  call a bullish "impulse leg.” The implication is that any pullback such as the one that occurred yesterday represents a buying opportunity.  As for our feeling of deja vu, the price pattern on the dollar's hourly chart

The Dollar Index has decisively exceeded a Hidden Pivot target at 77.44, but it will take a little more than that -- specifically a push above the 'external' peak at 78.87 shown in the chart -- to clinch the bullish case for the intermediate term (i.e., the next 3-5 weeks).  To qualify as a valid impulse leg on the weekly chart, the move from this point forward would need to be unbroken -- i.e., lacking a B-C pullback that is discernible on the weekly chart.

The Dollar Index has gone impulsively bullish on the intraday charts, but we should raise the bar a bit higher to keep our emotions in check.  Specifically, let's stipulate that DXY must pop above the external peak at 77.38 before we infer that something interesting is happening. If it happens in an uncorrected  lunge that also exceeds peak #1, we could be fairly certain that were are witnessing a powerful breakout -- the beginning of a rally that could last for months, if not longer.

I'd love to be able to say more about the dollar, but the medium-term charts have been constipated for months.  Presumably, there are two supports being defended by the Powers That Be:   early May's lows, just beneath 73; and the Maginot Line at 70. From a Hidden Pivot standpoint, the downside looks no worse than 73.09 on the next bout of weakness (see chart).  Alternatively, the futures would need to thrust above 75.75 to hint that something interesting was going on.  My suggestion is to set an alert at these numbers -- and to wake me if one or the other is hit.