I’ve been holding off updating my last US$ analysis until I was more certain that a low for my projected Wave 3 was in place, and I think that is pretty likely with this week’s close. My last analysis was done on September 8th when I thought that we had just completed the Wave 2 lower in what I was predicting to be a 3-wave move … that analysis turned out to be pretty accurate (click here). Here are the US$ monthly and weekly charts I posted back on September 8th.
US Dollar Index – Monthly Chart (September 8, 2017)
So my chart indicators did a pretty good job of visually warning me of a likely Wave 2 low, and price had more or less carved out that expected bounce into resistance and the final push down into a 3rd-Wave new low.
Here is the up-to-date weekly chart …
US Dollar Index – Weekly Chart
So overall, I think we can say that price has made a 3-Wave move down into the SLOT support zone that typically marks where support is found … now the question is, whether or not the 3rd wave move is complete enough to start setting up trades playing for a reversal in trend. Let’s look at the 195-min chart to see if we can get more evidence as to whether or not the push lower is complete.
US Dollar index ETF (UUP) – 195 Minute Chart
Again, I think I can see a nice 3-wave price structure to the bigger 3rd wave that we are trying to see if it is complete. The one fly in the ointment is the fact that the minor wave 3 did not push to a new lower low below the Wave 2 low. That happens occasionally and it is important that traders don’t get too caught up in price structure rules that would cause them to ignore the more relevant evidence lying in front of them.
By that I mean, wave structures often complete based on the textbook rules, but they also complete “when they fail to complete”. Again, if price fails to do the obvious or expected, then it is probably telling you things have changed and you should be looking to see if evidence presents itself that the trend has terminated at a non-typical level.
February 20th saw price break for the UUP break above the ATR resistance level, and now we have had 4 daily closes above that break level … to me the key right now is next week, and watching to see if price for the UUP can hold above the ATR support level of $23.35. Maybe the new FOMC Chair’s speech about rates and inflation are going to draw a line in the sand for the US$ and we are going to move higher now for a period that is likely to be several months in duration.
That kind of bounce is not something that tv-pundits are looking for and could have a major impact on US$ assets like oil and US interest rates/bonds. I like the set-up for bonds here and I have begun setting up reversal trades for TLT.
US 30-Year Bond Futures (ZB) – Weekly Chart
I think that bonds may have or are very close to making a tradeable low … the push lower touched the 1.272x extension target this week and price reversed off of that low and looks like it is making a nice doji/hammer candle that could be a nice reversal candle when we look back in a couple of week’s time.
US Crude Oil Futures (CL) – Daily Chart #1
Crude made a nice 3-wave move into what should be a nice tradable high if my read of the US$ is correct. Price has made a nice bounce right into resistance and a strong push down in the “C” wave or the 2nd wave of a 3-wave structure should begin next week.
US Crude Oil Futures (CL) – 195 Minute Chart #1
US Crude Oil Futures (CL) – 195 Minute Chart #2
So we are likely close to making a short-term high in crude … where is it likely to head?
US Crude Oil Futures (CL) – Daily Chart #2
So if my read is right, crude oil is likely headed to either around $55.84 if all we are going to see is an ABC correction, but if a bigger, more complex correction is likely, a 3-wave move could reach down to around that bigger 61.8% SLOT support level at around $51.47.
I have some April monthly $20 calls in SCO that I started a position this afternoon … I’ll look to add to this position as well as trying to take a short futures position going forward if all works as expected (how often does that happen?? LOL). I also bought some $10 May calls on ERY the leveraged Energy Bear ETF. 🙂
Gold and gold miners should also get hit if I am right about the US$ …
Gold Miner ETF (GDX) – Weekly Chart
I have not put on a bearish position yet in gold or gold miners as the above chart needs to start to break down before I get more excited … the oil chart is just much more clean-looking to me. Here is the Energy ETF monthly chart and one possible spot where it may be heading.
S&P Energy Stock ETF (XLE) – Monthly Chart
Cheers … Leaf_West