In the es today, every rally attempt had an upthrust and then promptly failed. No upside volume was generated all day and the close of the small range, indicating no buying interest, was near the lows. We are now hugging the low of the trading range of the past 2 weeks and a breakdown seems imminent.
I wanted to return to a discussion of the Dx. Since our last discussion the dx moved sharply lower and has now rallied to its support/now resistance, at 83.5. What is absolutely crucial in this move is to see that the extent of the down move implies something very significant is afoot. The range of the down bar in 12/2008 is the largest range of any monthly bar in at least 14 years. It fell quickly and easily. The line of least resistance is lower. This large range broadcasts to all who will listen that the long anticipated dollar crisis will occur. We have three closes, all within a fraction of a point indicates supply overcoming any demand. The supply enters about 1% below the resistance which means the demand is not sufficient to lift prices even that high.
Despite repeated bouts of selling, the euro fx intraday, has made a series of higher lows in a narrow trading range so far this week. This indicates accumulation. The accumulation is occurring at a long term support line of around 138. That the euro has only retraced 50% of the move up from its breakout at 131 or so is very bullish.
While the euro has been relatively flat in its three day trading range, the Swiss franc has rallied these three days, although not making a new high. Based on this action, the Swiss franc is the strongest of the currencies and could on this retracement be bought.
The yen is also back at support as is the pound. The latter fell on virtually no selling and narrowing ranges. Perhaps the pound is completing its accumulation as well. While stronger than the dollar, it is the weakest of the currencies I am commenting on.
Gold had a spring with a close in the middle of the range.
The profit taking after a large move in gold and currencies seems complete and the dollar's fall will soon resume.
