Since the Dollar Index doesn't give us real time data to analyze multiple intraday timeframes, UUP has served well as a proxy for the D.I. There are a couple of lessons that I have mentioned repeatedly about how the market works with regard to reversals and a good timing indicator, you'll see that in the UUP charts. I'll start from the daily (most important timeframe) and work down with the 3C charts.
UUP daily 3C - In early 2011 we had a Stochastics negative divergence, which is one of two ways I find Stochastics useful. In January UUP made a false breakout above the short red trendline, which represented new highs, 3C did not make a new high with price so we had a negative divergence or distribution in UUP. As usual, the false breakout is an excellent timing indicator for a reversal and that was the ultimate final reversal in UUP . While 3C daily is the most important timeframe, it is the slowest to respond to divergences, it is worth noting though that we have another Stochastics and RSI positive divergence.
The 60 minute chart gives us some more detail, in late March during a brief counter trend move, we had another false breakout in the little white box to the left of the chart. It didn't make a big breakout, but retail traders insistence on viewing support and resistance as EXACT levels to the penny, make a breakout of a few cents worthwhile for Wall Street. The same thing happened on another counter trend bounce in April, again n the small white box with the red trendline representing resistance. Once again 3C did not make a higher high with price and we had another negative divergence. In May there was a very brief accumulation period and once again, a false breakdown below the red trendline that started the move up. As you can see, these false breaks are excellent timing indications. Note also 3C made a higher high as the breakdown made a lower low-a positive divergence, the stops that were hit during that breakdown were accumulated and UUP moved up from there. Later in May, you guessed it, another false breakout above the red trendline (in the white box) while 3C made a significant lower low, this was distribution and UUP tumbled promptly from there. Recently during June, we've seen a 60 min. positive divergence at the white arrow, I believe this will end up being a bigger divergence, meaning I think there' more accumulation to come.
The 30 min chart confirms the charts above, with some more detail. That false breakout later in May is quite visible, as is the negative divergence (red arrow). Note distribution had started before that, it takes some time to distribute an accumulated position, but the false breakout was an excellent timing indication of the end of distribution. Note again in June, the positive divergence forming.
The 15 min 3C chart- a closer look at the May false breakout and the current positive divergence. The part in the large white box is a leading positive divergence and the most powerful type of divergence. It is making new highs on this chart, despite prices being near the lows.
The 10 min chart simple shows the range in which accumulation is taking place, Every time UUP moves up too high in the range, a negative divergence sends it lower where it is accumulated. There was a negative divergence end of day 6/6 which sent UUP lower on 6/7, today there was another negative divergence in the same price area. It seems whoever is doing the buying (and John Taylor openly admits he' accumulating the dollar), they are pretty specific about where they want to average their position and it seems to be around $21.
The 5 min chart just confirms what we see on the 10 min in more detail.
And today's 1 min chart. Note there was good confirmation (green arrows_ with higher highs in price and 3C until the last two hours of the day as we approached that $21.15 level
Looking at the range, it seems for whatever reason, accumulation is pretty low in the range. Big orders are often routed through market makers, in this case a specialist and they often have a specific target they want to accumulate at. So the specialist will knock prices down to fill the order at the customers target range. If they don't, it's unlikely they'll be getting repeat business. I don't know why they are so specific about such a minuscule difference, but they appear to be. As far as how long this accumulation may go on, we have no idea of how big the order was and at what average price so it's hard to say when this will hit mark up, but as usual, look for a false breakdown below a well defined support level as a timing trigger to launch the dollar into mark up.
While as a general rule of thumb, there tends to be an inverse relationship between the dollar and commodities/precious metals/equities, I've noticed that relationship is not as consistent as it has been in the past. of course there are a number of reasons that are outside of the dollar inverse relationship that could be influencing this such as surprise news and statements out of the EU, specifically with regard to Greece, also margin hikes and the recent margin discount of ES (which was strange as it was in the face of rising volatility. In any case, an inverse relationship between the dollar and the above mentioned assets cannot be counted on as reliably as in the past. This seems to work to the benefit of our Miners trading system.
I'll update precious metals in the morning, but generally my recent view has been to look for a deep correction in gold (perhaps that 2 time in a year buying opportunity at the 150 day moving average) and even though silver is trading at a deep discount to the historical ratio between gold and silver, it seems they are out to get silver. Whether this is in support of whatever may be left of JPM's short on silver or has to do with something altogether different, I don't know, but considering the deep discount silver was trading at, the 5 consecutive margin hikes out of the CME were well designed to halt the rally in silver. The CME's volatility explanation was weak when they published it, it was even weaker when they dropped margin requirements on E-minis in the face of rising volatility, expressly contradicting their margin/volatility paper released after they were widely accused of manipulating the price of silver through a seemingly unreasonable amount of margin hikes (5 in all and 1 about every 2 days on average until the silver rally was stopped in its tracks). For that reason, I'm a bit bearish on silver as the COMEX/CME seems to be taking orders from higher ups-perhaps the treasury or the Fed and those are two entities I'd rather not go up against at this point.
