Wednesday, September 30, 2009

Dollar - Hanging on the Edge

The dollar is hanging on to the declining wedge. It has not rallied impulsively. It needs to bounce hard tomorrow, otherwise, it looks potentially like it will attempt to match the 100% target for wave 5 down. This is around the 74 to 74.20 area and would coordinate well with a push in early October till the 7 to 9th. However, the reason that I suggested that the dollar configuration could be consolidative is there are multiple elements that are not pointing to a substantial rally in the markets here. The VIX is one of them. The VIX was up solidly as was the Put/Call. The positive VIX indicates a trend emerging to me, and the put/call may indicate a reaction in the market of a little more upside. I would not prefer to see the dollar fullfill the pattern below. But, the structure for Gold and Gold related stocks and Oil point to higher prices unless we get immediate or very quick reversals. The VIX supports the potential reversal scenario.

So, given the put/call and the $VIX setup, perhaps we are looking at a finishing move up in the am for the transports and indexes and then as sharp reversal. I will be buying into the reversal scenario if VIX takes out the recent highs.

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