06-06-2017: September U.S. Dollar Index: Mixed Global Situation Leaves Downtrend Suspect

(Click on links below. Whole page needs to load before links work.)

Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calend Spread

Level Table
Other Factors
Recommendation

5
1
3          01

2          4


Introduction

6 One our favorite "mantras" has been, "A move once underway in commodities generally travels much farther than most think it will." Recent trends in the U.S. Dollar Index have been down. With somewhat mixed news on the economic front, we see little reason for events to change this overall trend. The way Republicans have been governing this country and the apparent lack of leadership in all three branches of government do not suggest to us any great ecoonomic resurgence. In fact recent economic data has been weak domestically causing the Fed to consider postponing any further rate hikes. Interest rates paid on currencies is a key factor attracting investors to a particular currency, although it is odd that Japan's currency is regarded as one of the best "safe havens." With global tensions on the rise, there just isn't enough good news to suggest a change in current downtrends in Dollar vs. other currencies.

However, having said all that, our "system" goes against the grain of majority opinion and based upon technical factors believes the U.S. Dollar will turn and start back up again. It is in the area of what we would call a very "weak" and risky prediction. But we must follow our system if any sort of consistency is to be maintained, and frankly this outcome was a bit of a surprise, especially since it seems to against recent news. The Fed could raise interest rates in late June. Global tensions, espeically with the Qatar situation, make the U.S. Dollar a safer currency as the U.S. may be less directly affected than many other nations. It is not impossible to construct further rationales, both technical and fundamental for an ending of the downturn in the Dollar trend.


Intermarket Analysis

We fed the U.S. Dollar Index, the Canadian Dollar, and the Mexican Peso (North American linked economies) into a neural network to get the following result:




Parabolic Chart

September U.S. Dollar Index:

Parabolic Chart


Nirvana Chart

September U.S. Dollar Index:

Initial Chart


News Analysis

Recent U.S. Dollar Index action is described as "mixed." Ahead of general elections in Britain, it is weaker against the Pound. But the Pound suffered from weakness caused by recent terrorist attacks in London. The U.S. Dollar has recently been rising against the Euro and the Japanese Yen. The Yen could be affectd by a group of Gulf states cutting diplomatic relations with Qatar affecting oil prices and availability, critical for Japan. Qatar was accused of supporting terrorism. However, U.S. factory orders in April showed a dip of 0.2% weakening the Dollar and the Index of Service-Oriented Firms also weakened slightly. That index was forecast to be higher. It is expected that slightly increasing Treasury yields will not be sufficient to be positive for the Dollar by themselves. Political scandals related to the FBI investigation of Russia's meddling in the presidential election is also negative for the Dollar. Softer economic data will tend to weaken the U.S. yioeld curve. That would tend to postpone any Federal Reserve rate hikes which by themselves would strengthen the Dollar.

Any recent strengthening in the Dollar Index doesn't change the fact that the Index is close to 7-month lows. There are concerns that there will be a slowdown in U.S. economic activity .

The use of financial and political power of Qatar to influence events in Libya, Egypt, Syria, Iraq, and Yemen could spark a rise in oil prices and slow down other economic activity. Gold has been rising due to international tension jitters. Disappopinting U.S. employment reports also have supported gold, and reduced expectations for any U.S. rate hikes.

Jim Cramer issued an article on CNBC based upon chart action, "Why the U.S. Dollar may be due for an upswing."

Weaker stock and commodity markets may result from political worries in Europe and cautious global sentiment. Traders may turn "risk averse."

Pressure on the Euro comes from Italain elections that could affect Italy's participation in the Euro Zone. Still, there appears to be come optimism allowing the euro to "churn" a bit against the U.S. Dollar.

The Japanese Yen is considered by currency traders at present to be a safer haven than the U.S. Dollar.

Federal Reserve minutes were certainly no help in supporting the Dollar as the Fed determined to hold off on rate hikes until they saw evidence that a recent economic slowdown was transitory. Investors had expected minutes to be more hawkish.

News seems to be quite mixed for the Dollar suggesting a "flat" trading range for the foreseeable future. But unlike stocks, we prefer to think that commodities have only two directional choices, unlike stocks with three, i.e. up, flat, or down. For commodities we think it will inevitably always be either "up" or "down." Given that, the bulk of items seem to favor more down.


Point & Figure Chart

104.0I                                                                  R  6/ 2
     I ICE - Sep-17 U.S.Dollar Index, Idx X $1000  Cm.=0.06  Lim.= 0.6
     I
     I
     I              X
103.0I________X_X_X_XO_________________________________________________________
     I        XOXOXOXO
     I        XOXOXOXO
     I        XOXO OXO  X
     I        XO   OXO  XO
102.0I________X____OXO__XO_____________________________________________________
     I        X    O OX XO
     I        X      OXOXO          X X
     IX       X      OXOXO          XOXO
     IXOX X   X      OXO O  X   X X XOXO
101.0IXOXOXOX_X______O___OX_XO__XOXOXO_O_______________________________________
     IXOXOXOXOX          OXOXO  XOXOX  OX
     IXOXO OXOX          OXOXO  XOXOX  OXO
     IXO   OXO           O OXOX XOXO   OXO
     I     OX              OXOXOXO     OXO
100.0I_____OX______________O_OXOX______OXO_____________________________________
     I     OX                OXOX      OXO
     I     OX                O OX      OXO
     I     OX                  OX      OXO
     I     OX                  OX      OXOX
 99.0I_____O___________________O_______OXOXO___________________________________
     I                                 OXOXO
     I                                 O OXO
     I                                   OXO
     I                                   O O
 98.0I_____________________________________O___________________________________
     I                                     O
     I                                     O
     I                                     O
     I                                     OX
 97.0I_____________________________________OXO_________________________________
     I                                     OXO
     I                                     O O
     I                                       O
     I
 96.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
      11111111111111
      1112222222222211111111111122223333345555
      1220000111222200011111122301220001210133
      8892558346028934601137807136131380929501
Our computer tells us a non-conventional reactive approach works best for on p&f charts. Therefore the above chart is taken as giving a buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical high and a seasonal up period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Commodit". In comes bunched in with a Winters Time Series Forecast. It is giving a buy signal.

Internal Printout 1 Internal Printout 2

Results of "Commodit" for U.S. Dollar Index (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $1,000. Initial margin on a single contract is $1,980. Use of options is advised.


Historic Range

Scale trade sellers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Commercials with the best track record are getting increasingly-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to up is imminent at a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) U.S. Dollar Idx September 92 Put and Sell (1) U.S. Dollar Idx September 94 Put @ 0.24 to the sell side or greater.


o 1 o 2 o 3 0 4 o 5


Calendar Spread

What the Sep. - Dec. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up in the long run. The best time to enter or leave the above spread is when it is at 0.09 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at 0.26 or wider buying the far as prices are rising and then selling the near. At this time, we appear to be at the buy the far, sell the near point.





Level Table:

Level Table

The path of least resistance is down.
104.0|                                                                  R  6/ 2
 ICE - Sep-17 U.S.Dollar Index, Idx X $1000  Cm.=0.06  Lim.= 0.6
     |
     |
     |P
103.0|OPPP_____________________________________________________________________
     |OPPPPP
     |OOOPPPPPPPPP
     |OOOPPPPPPPQ
     |OOOPPPPQ
102.0|OOPPQ____________________________________________________________________
     |OOPQQQ
     |OOPQQQQTTUU
     |NOQQQQQTTTUUU
     |NNNNOQQQQQQSTTTUUUUU
101.0|NNNNNNNNOOOQQQQQQQQSTTTTUUUUU____________________________________________
     |NNNNNNNNNOOOQQQQQQRSSTTTTTUUUUUW
     |NNNNNNNNNNOOOOQQQQQRSSSTTTTTUUUWW
     |MNNNNNNOOOOQQQQRRSSSSTTTTTUWWW
     |MNNOOOQQQRRRRRSSSSTTTUWWWWW
100.0|MMNOQQRRRRSSSSTUUVWWWWWWWW_______________________________________________
     |MMNOOOQRRRRRRRSSSSUUVVVWWWWX
     |MMMMNOOORRRRRSSSSSUVVVWWX
     |MMNOORRRRRSSSVVVVXX
     |MMORRRSSVVVVVXXXXY
 99.0|MMORRRVVVVXXXYYYY________________________________________________________
     |MORVVYYYY
     |LMVVXXXXXXYYYYYY
     |LLLMMVXXXXXXYYYYYY
     |LLLLLLLMMXXXYYYZ
 98.0|LLLLMMYYZ________________________________________________________________
     |KLLLMZ
     |KKKKKLMZ
     |KKKKKKKLMMMZZ
     |KKKKKKLLMMMZZZZ
 97.0|DDEKKLLMMZZZZ____________________________________________________________
     |DDDDEKLLMMMZZZZZZ[[
     |DDDDDEKKLMMZZZZZZ[[
     |DDDDEKKMZZZZ[
     |BCDEEJKKM[
 96.0|BBCCCCCDDDDEEJKM   <<<
     |BBCCCCCCCCDDDEEEEEHJJJM
     |BBCCCCCCCCCDDDEEEEGGGHJJM
     |BBCCCCCCDDEEFFGGGGHHHHJJ
     |ABCCCCEEEEEFFFFGGGGGHHHHJJJ
 95.0|AAABBCCCEEEEEEFFFFFGGGGGHHHHHHHJJJJJJ____________________________________
     |AABBEEEFFGGGHHHHHHHJJJJJ
     |ABBBBEEFGGHHHHHJ
     |ABBBBFFFGGGHH
     |AAABBBBBFFFGGGG
 94.0|AAABBBBBFFFFFFGGG________________________________________________________
     |AAABBBFFFG
     |AAABBBF
     |AAAABBBB
     |AABBB
 93.0|AABBB____________________________________________________________________
     |B
     |B
     |
     |
 92.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.432
                         1 1 1 1 1 1                                  
       6 6 6 7 7 8 8 9 9 0 0 1 1 2 2 1 1 2 2 3 3 4 4 5 5 6           6
       0 1 2 1 2 1 2 0 2 0 2 0 1 0 2 0 2 0 1 0 2 0 1 0 1 0           0
       1 4 8 3 7 0 4 9 3 7 1 4 8 6 0 5 0 3 7 6 0 3 8 2 6 1           2


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 6/05).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

               DXU7    September U.S. Dollar Index

                      High Price:  98.77
                   Current Price:  96.39
                       Low Price:  95.21

                            Risk:  0.024
                     Opportunity:  0.049

                    (O/R) Ratio =  2.017


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart - 1
Nirvana Chart - 1
News - 1
Point & Figure + 1
Cyclicals + 1
Seasonals + 1
Internal System 1 + 1
Internal System 2 - 1
Third System + 1
Historic Range - 1
Commitment of Traders + 1
Range/Volatility + 1
Level Table - 1
Other Factors - 1
Total + 1
Place 7 September U.S. Dollar Index contracts on a Buy Watch with stoploss @ -1.09 below the get-in point when recent price is represented as "96.805".
____________________________________________________________________________________________________________________________________________C.T.