Thursday, October 22, 2009

The US Dollar Picture

Above is the 4hr USD/CHF chart which mirrors the US dollar index quite well. The wave count shows the decline since March of 2009 coming to an end, with the subdivisions of wave v of 5 of C concluding with what could possibly be an "ending diagonal", which is typical at the end of trends before major reversals. If so, there should only be one more shot downward before THE LOW is in. Typical targets for 5th waves are the length of wave 1, or a multiple of fibonacci's 61.8%. Since it's already exceeded wave 1's 61.8% level, I'm looking at the 100% and 161.8% levels which are 1.0012 and 0.9879 respectively. A reversal at these levels would be a huge indicator that this wave count was correct, and that the US dollar has formed a major bottom that will lead to a multi-month, if not a multi-year, monster rally that will move inversely to stocks, which should be crashing during that time.

This count on the dollar coincides with the bearish S&P count I posted earlier which would require the S&P to tank hard immediately Friday morning. The dollar can easily slip to a new low in the Asian or European sessions tonight, form a bottom and rally into the US session's open, causing a heavy stock market selloff.

Of course, this is aggressive speculation on my part, but I thought I'd entertain the idea since the wave count on the dollar can count complete soon, and since the stock market decline from yesterday has yet to be completely retraced.

We'll see.

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