Friday, July 9, 2010

For Dollar Bulls (and Bears)

7th july video analysis of the dollar index

This is a elliott wave analysis of the USD index. The components are : http://www.babypips.com/school/the_usdx_components.html The analysis starts at a monthly level (monthly high low close) since 1985. That shows that the Dollar is due some major bull move. You can see the 1 and the 2 on the far right. As Laura says after the pink 2 comes the pink 3 of the green C, and that C should eventually break the break the green A (2001). This (amongst other supporting indicators) was why i said @ 2 [when everyone was saying that the USD was finished] that no the dollar was about to make a big move up. So why is it important, how reliable is it and what has that got to do with asset prices? I will say why i think that in the comment below.

Posted by techieman @ 10:57 AM (1368 views)
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7 thoughts on “For Dollar Bulls (and Bears)

  • …or even what i think. Ok first of all i think of the 2 alternatives i would go for the one at 3.55 rather than 2.20.

    Now as to why its important. Well as we have seen a rise in the dollar will be caused by either a fall in the Euro (which makes up most of the index) or US debt liquidation or a combination. Of course US debt liquidation reduces the supply of dollars – i.e. the money supply and is deflationary. So it predicts (assuming the count is right – her monthly count is the generally accepted count, although nothing is 100% foolproof) a deflationary environment until C (first chart) is over. At that time we would then see dollar falls, perhaps inspired by some hyper-inflation??? But that is years down the line.

    So if the dollar appreciates then US asset prices will fall further – or the cause and effect is the other way round – in a defllationary depression. That will take the stock market and therefore other international markets with it. Now after that or even during that there will possibly be a shift in the balance of power so either china and/or india has an economic dynamo, but being led by their own consumption rather than export lead.

    Why not export led? Cause we will be broke!!

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  • Dollars hits daily trendline. That’s all folks. Counter trend as far as I am concerned.

    I shall be buying the dips. That’s because I have a different faith that has served me very well.

    You would’nt understand as hard as I have tried in the past.

    Recapthcha~”the glossy” lol

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  • mountain goat says:

    TM – No surprises that I agree on the dollar. Dollar rise means liquidity will get very tighter and this will cause deflation. Of course Helicopter Ben won’t stand by unless he is ordered to. Which means when it is politically acceptable to start printing he will, which depends on when Americans are prepared for the nuclear option. I suspect only after widespread local government bankruptcies and general mayhem and as you say years down the line. But it does seem inevitable and perhaps then gold and silver will have their day.

    Not so sure about us being broke and China taking over. China will not give up it’s exports and let the yuan appreciate as long as it has a gigantic pile of Treasuries as it’s piggy bank. Letting the yuan appreciate 10% to the dollar is basically like making this piggy bank worth 10% less at home. Accusing China of currency manipulation is nonsense, asking them to let the yuan appreciate is like asking them to write off US debt. I have no idea what will happen but I don’t think “we broke, China rich” is going to happen either. They also have a bubbles economy, and an aging population thanks to one child policy and they will also have the social problems caused by girl baby infanticide happening today.

    Education and creativity seem the most likely ways to generate wealth in the future.

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  • MG – fair comments about China. I do think they go through some austerity too, on the back of us. i actually am looking down the line to get into the Indian stock market, rather than the other BRIC members. But all of that is long term and of course means that might change.

    In the meantime if the USD / dollar index doesnt violate key points, as we discussed before Long dollar / short exchanges seem to be the way to go. All of this recent dollar weakness is not imo the start of the fall of the dollar, and the point of the post is it looks like we are near a good opportunity to get long dollar and liquidate any £s / Euros we have for the countertrend rally.

    As for gold and silver, i just think if that falls in a deflationary spiral, then it will bounce along the bottom for quite a while before any upward impetus. This seems a strange discussion given where gold is though! Eventually the hyper inflationists may very well be able to say “i told you so”, however at that time i think its safe to say both you and i may have joined their ranks and some of them may have then left the ship!!!

    Funny old game!

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  • mountain goat says:

    TM – “the point of the post is it looks like we are near a good opportunity to get long dollar and liquidate any £s / Euros we have for the countertrend rally.”

    Thanks I have found having some savings in the dollar helped in the face of ridiculously low IR, and it is fairly low risk. As usual I made my move too early 2 weeks ago (back to the rotten dollar). But actually since I was in £ this was ok, since the £ rallied before the Euro and has been range bound since then against the $.

    To clarify my off topic statement “Education and creativity seem the most likely ways to generate wealth in the future.” I didn’t mean education as a profession but rather keeping yourself educated in new developments. As an example I went to Holland last week and was gobsmacked by the number of new office buildings that had mushroomed since I lived there 20 years ago. I thought what are these people doing, surely not admin for the Netherlands alone? I suspect most of these business’ are IT/admin/infrastructure servicing the Eurozone, at the expense of the PIGS countries’ business’ who used to do this.

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  • So le crunch now the dollar is a buy?? but but but but i thought the dollar was CERTAIN to collapse, isnt that what you told me? And just when it bottomed :-).

    you do make me smile!! :-). I hope your credibility isnt reflected in yr account size!

    … and you wonder why you are ignored?

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  • No tech, wrong again, the dollar is a sell. That means I’m buying euros. That means the fall in euro/usd on friday for me is a counter move not a continuation of the the silly game. Just some neg divergents and it hit a main trendline, no big deal.

    I told you long ago that the dollar is finished. I don’t change with the wind. If you look at the euro monthly chart you will see that the euro was nowhere near crashing. Hype my friend, hype. Greek Islands for sale! Stop scratching your head.

    As I said above, you won’t understand but when the dollar crashes I shall drop in and talk all about market cred and how you missed out.
    Yes, you missed the entry.
    Keep your nose in your own accounts. It’s a sign of insecurity.

    Happy trading. 🙂

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