Interesting Point For The Dollar & The Dow

How Will The Dollar Perform From Here?

The US dollar index closed below 75.75 on Friday, which is where there is a falling trendline resistance drawn from the July 2009 high. This implies that the long-term down trend line is holding strong and the currency’s downtrend remains in place, suggesting further weakness.

Not much action is expected for the dollar in this following week, US markets will be closed on Thursday for Thanksgiving and will be closed early on Friday. As a result, there will be lower than normal volumes, which may contribute to either flat price movements, choppy-rangebound trade, and no real direction.  Since, event risk will be very high all week the rangebound, choppy trade is the most likely outcome of this next week.

Both technically and fundamentally, our outlook for the Dollar is continued weakness. Ultimately, we suggest you increase your exposure to inflation protected assets, and assets which benefit from a declining Dollar value.

What's In The Cards Now, For The Dow?

We are moderately bearish and still believe there is a soon to be 8-10% move lower, minimum. However, there has been no confirmation of a top in US stocks yet even though a small pull back was seen last week after touching another high for 2009. We know that there is strong resistance for the DOW at the current levels.

Fundamentally, economic news is expected to be mixed. Technically, the DOW is overbought,and experience moving average divergence; both of which are indicators of potential poor-negative performance. Also,  the DOW is very near the 50% retracement level of it's Record high in late 2007 to it's low of earlier this year, 50% retracement from14198 to 6469 at 10334. 50% is a VERY significant number in technical analysis, specifically Fibonacci, because there is normally overwhelming tendency for markets to continue in a certain direction once it completes a 50% retracement. That certain direction the DOW has been in before this 50% retracement began, or March of 2009, is down. Hence, a downward move should very soon be seen to 9880, a short-term support level.