Daily Spotlight: Dollar Basket
A weekly summary of one complex, including daily updates of other developments elsewhere.
[pay]As this post’s title implies, I’m reinstating and expanding my coverage of other markets. Each day will focus on a different complex (the schedule is at the bottom of each post). Soon more coverage within each complex will be added, and Softs will be added on Fridays.
[pay]Dollar Basket Dec (DXZ) The Dollar’s drop had gotten ahead of itself. Prior lows (red dashed line) were being probed despite having failed to confirm a break lower from two days earlier. A corrective bounce was likely, either to 82.88-82.98, or to 83.18-83.29.
The latter limit was riskier because any higher would have triggered a more substantial recovery underway. But it was tested, it held with only pennies to spare, and it resolved down sharply.
The resulting pattern formed a Head & Shoulders (defined below) whose 161.8% target would retest August’s low around 80.60. Head & Shoulders patterns tend to be more productive than that, making 80.20 or 79.55 likelier.
The pattern’s drop requires no specific schedule, and a bounce back to 82.75-82.80 is possible before extending down. But a valid decline would delay bouncing until after Tuesday, which would otherwise prevent Monday’s break from being confirmed by a second consecutive lower close.
30-year Treasury Dec (USZ) Probed lower lows but didn’t close lower. Immediate drop Tuesday would be credible for extending down.
Crude Oil Oct (CLV) Friday’s rejection of Thursday’s failed breakout was extended higher Monday. Sellers should be marginalized through Wednesday morning.
Natural Gas Nov (NGX) Friday’s gap up got ahead of itself, and Monday’s fresh high only ranged round Friday’s high. A pullback would help to refuel buyers for a more durable rally. Extending higher first would be suspicious.
Gold Dec (GCZ) Last week’s second big intraday dip bounced from testing the prior big dip’s low around 1239.00. Closing any lower for two consecutive days would seal a top, targeting at least 1216.00-1218.00.
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Share your questions and comments in this blog post’s Comments section, or during the chartroom’s What’s Next morning market tour, and in the day’s end Markets on Close…
Weekly Spotlight coverage’s schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).