How Low Can You Go?

I know what you are thinking when looking at that Dollar chart:

How low low can you go?

Alright, time to look at our trusty DXY RLs - again, brought to you courtesy of retracementlevels.com.

If you look at the chart on the very top it’s quite clear that the Dollar will most likely run into long term support around the 73.5 - 74.5 cluster (highlighted area) which goes back to early 2008. Which is why I set the 100% RL to 73.88. According to 2sweeties fib retracements the prior line of defense is right now and right here at 74.55 - the odds are above 90%, quite high I must say.

In terms of historic frequency the 74.55 level actually has the higher frequency - unfortunately we already busted through a whole cluster of gorgeous RLs in the past week (cough - currency manipulation - cough!).

So, I’d venture to say that Dollar bulls should start adding long positions right here and right now. Yes, we might drop to 73.88 and perhaps even 72.78, but Ben Bernanke and his Dollar hating cronies notwithstanding, nothing goes down forever. Plus, if we drop through this last cluster of support we are basically talking major currency crisis, and at that point it really doesn’t matter if you’re a bull or bear anymore as this country would go to shit in a hand basket.

Cheers,

Mole

This entry was posted on Wednesday, November 25th, 2009 at 1:37 pm and is filed under Currencies, Market Outlook, Retracement Levels. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

minus273

It's like limbo, how low can you go:
http://www.youtube.com/watch?v=b97VcBv4xu8&feat...

amokta

Dubai's main investment fund seeks debt payment delay .The government-owned investment company behind Dubai's rapid development drive has asked its creditors for a six-month delay on repaying its debts.

--if dubai defaults, the whole world economy falls

molecool

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¨°º¤ø„¸ N E W „ø¤º°¨
¸„ø¤º°¨ P O S T ``°º¤ø„¸
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Schwerepunkt

How does Thanksgiving affect ES trade?

Persian_Gerb

http://en.wikipedia.org/wiki/Tryptophan

PRSGuitars

From theMacroEconomist:

TheMacroEconomis
Equities and options markets are closed. Futures will trade on Globex overnight until 11:30 US Eastern (stock indexes) or 1PM (most of the rest) tomorrow, then close until 6PM.

Here's the PDF with futures details:
http://www.cmegroup.com/tools-information/holid...

Schwerepunkt

Thanks, I found the page and then saw your response. I should've looked it up before posting. Getting lazy in my dotage.

gregn

On the upside, VIX is up ;)

RDMT

Rally into the close. A lot of bears anticipating the end-of month correction must be near breaking point now.

What are the chances of another impulse up occuring as short-covering takes place...

PRSGuitars

Great possible VLO setup for any last minute takers -- long Jan 17.5s for multi month flag continuation (don't want to be in it if it breaks lower though!)

DavidDT

Centrifugal was spotted smoking good stuff
http://screencast.com/t/Njg0NWM5NmIt

molecool

I could use one of those...

gregn

Looks like a Montecristo.

Me_XMan

HAVE A GOOD THANKSGIVING EVERYONE!

raised_by_wolves

My prediction: $INDU closes slightly red today.

raised_by_wolves

Got that one wrong but don't care. I was green today.

bubble jeopardy

jnk and gold been rallying for awhile now, which came first, the chicken or the egg?

ClutchShorter

On Nov 1, GS broke under the 50 day EMA/SMA moving average. This MA served as resistance as it retested it but could not break above it. It continued to sell off and now broke $170 support and sinking.

You can't have a market rally without GS. Get the f*ck outta here. Rally ain't fooling me.

BEARS UNITE!

raised_by_wolves

I'm short equities too, but I'm pretty mellow and relaxed with 204 and 422 days to go before expiration.

ClutchShorter

I have 25 days, 53 days, and 120 days until expiration. My front months have pretty much eroded. I might salvage whatever's left of it by next week or so.

Me_XMan

Ya like getting burned together.

ClutchShorter

You might not believe this, but the risk is to the upside!!! Even though it has been rallying, momentum is waning and you see more and more market commentators talk about how destructive this dollar carry trade is and how the market has gotten ahead of the economy. Yes, markets are ignoring everything but this is like the sinking titanic. All the upper class passengers were able to safely get off the boat. The lower class passengers started panicking, scrambling, screaming, yelling to find a way out but they ended up sinking with the titanic. Guess who the upper class passengers are analogous to in Wall Street. You betcha - big boys GS.

Come on bears!! UNITE

bubble jeopardy

The ship is listing badly as just about everyone is on one side.

PRSGuitars

A/D line dropping, but EUR going higher. I think we've reached the puking point (watch; i'll jinx it)

PRSGuitars

DX trendlines: http://screencast.com/t/NmNkYjgzN2

Schwerepunkt

volume is picking up as DX goes lower.

Me_XMan

Anyone getting new shorts here?

PRSGuitars

As someone just said, GS and XLF red on the day. VIX now positive in a green market. TNX way down (bonds up!). EUR skyrocketing but nothing going on in SPX... seems fishy to you too?

Heads up.

kryxtal

Very.

zstock, Pro Select!

Shorting CVX for an overnight trade, btw, Thursday closed, Fri half day

zstock, Pro Select!

Around Thanksgiving, the market turns bearish. Maybe next week, some down days?

molecool

Traditionally it does - yes - correct. However, it seems that none of the traditionally bearish periods have been observed this year. I'm throwing the towel on 2009 at this point - fuck this.

weasel_whisperer

If we do get to a point where there's a disconnect between dropping dollar and rising equities (i.e. dropping dollar results in dropping equities), does the Fed still have an incentive to see the dollar destroyed? Is the Fed's main goal to pump up equities or make U.S. goods cheap abroad? It just seems like we don't manufacture enough things to make the later a goal.

zstock, Pro Select!

If you didn't short PCU at 35.9, just now, You missed out--what a great overnight short--YAY!

gregn

TL from SPX 1500 held up: http://screencast.com/t/MGY1YmY1OGQt

rikardo_kurvio

hi

one of extreme possible scenarios is shown on usd/jpy chart.
we are entering last year's lows, but this time reason is opposite ;)

also, usd/jpy bear market channel initiated in june 2007 could drive buck to april 1995 lows

http://www.screencast.com/t/YmNiMTM0YzM

bshah

mole,
how's ur Jan AMZN looking...? How long were you holding them..? fyi.. my account now has $3900/- from at one point $29000/- ... i can't file for bankruptcy either.. screwed really..

Scoops

Congrats on the stellar risk management buddy.

ClutchShorter

You put all your money in AMZN puts?

bshah

no.. i didn't.. But excluding few positive trades, i lost my bets in every one of those. It wasn't that i was holding front end way out of money puts, but it just didn't work in my direction.. clueless right now surely frustrated to admit..

ClutchShorter

It's alright, I'm in the same boat. I'm down 25% from my high in September. Bulltards running on fumes have their life savings in equities because risk is non-existant. All laws of investing/trading have disappeared these past few months. Risk management rules have changed : : IT IS RISKY TO KEEP MONEY IN CASH, BUY STOCKS!!!

rosocecasita

Created this program to pull a report / compiled data from FINVIZ:

http://www.mediafire.com/?lhy25kvzout

It includes source code, here's a screen shot: http://fwd4.me/5rI

bubble jeopardy

Now, here is a bar chart and why the bulls are so confident:

http://www.screencast.com/t/MzU3OTVjY

funkypenguin

Anyone for a condo in Vegas :<)

bubble jeopardy

Stimulus from the government will turn them into high rise prisons.

bshah

so you are saying, all bulls are living in NYC ?

bubble jeopardy

isn't that where all the tarp money went?

bubble jeopardy

the gs boys and girls are

centerline

lower channel boundary (short-term) points to 1109 FWIW. Possible close here.

jd60

So what do you do to prepare for a dollar crisis?

centerline

Toilet paper, canned food, ammo and liquor.

Generator, TV and stock pile of porno movies optional. :-)

momac

by golly I'm ready. :-)

Me_XMan

LOL!

centerline

I have a strangle feeling that Monday is going to be a very interesting day. There is just enough wiggle room to park this thing by Friday right in indecision. For the bearish case, I think we have to look for a close below 1110.31 today and Friday. VIX is already coiled to pop.

Stainless_Steel_Hamster

just a little more and it's gold 1190

yudhisthira

Just a little farther to take out the approximate prechter high. Will the dollar sink help into the close or is that all they got?

gregn

Poking through that long term trend line...

bubble jeopardy

Since silver hasn't exceeded its prior year highs, this rally may be a gift.

Duuuuuude

You mean since it did not take out its 2 year high?

bubble jeopardy

yep, and the divergence between gold surpassing its 80 high in nominal dollars and silver not even close, is glaring

bubble jeopardy

Thinking it is about time to turn silver into dollars.

Rightside_ot_trade

Possible exits:
Monthly R2 pivot at 18.9, R3 at 19.7 , Weekly R2 at 19.3 and Daily R2 pivot at 18.865, R3 at 19.1
I will short at 18.85

Rightside_ot_trade

Correction: Daily R2 at 18.883

Stainless_Steel_Hamster

5's DO get overexcited

we have a GS wave in progress

bubble jeopardy

For dollar shorts, the expression "it can't get any better than this" comes to mind. Therefore, the penthouse elevator has only one direction to go.

bubble jeopardy

Wonder if Buffett sold his options on gs before the latest rollover?

Nightwind

We could get a possible dead cat bounce on USD

LostIllini

We are getting to a point of diminishing returns on Dollar Destruction. A 1.10% drop in the ole buck translates into a .39% gain in the S&P.

molecool

EXACTLY - this is the point Denninger kept making two weeks ago. The proof is now in the pudding.

Me_XMan

Mole. Are you short?

Schwerepunkt

Does that mean dollar stops dropping, or that it crashes to keep the equity bubble expanding?

Nightwind

We are between the low retrace points on $dxy based on Moles posting.

gregn

We are at a critical junction point: http://screencast.com/t/MWU1Y2M2Y

LostIllini

Good deal, now to find out if it's a bull or bear market....

catracho

news? on euro?

Schwerepunkt

Could be the messy climax before Greece slides into the Mediterranean taking the rest of Europe and the Euro with it?

We can dream, can't we?

Schwerepunkt

WOW! EURO just spiked.

Rightside_ot_trade

For the futures the R3 Daily pivot is at 1.5149, we hit 1.5142 before turning down

yudhisthira

I'd like to see one more ramp up before going short again. Since I am waiting till Friday, it'll probably start dropping toward closing time.

Nightwind

EUR/USD is rocking

gregn

So indexes down yesterday and VIX down with it, today VIX and indexes are up ;)

Nightwind

EUR/USD ....new high, ....indices limping along

bshah

what a rape this is...?

bubble jeopardy

$vix making a double bottom on daily?

raised_by_wolves

There's a $VIX double bottom on the 30 day. I wouldn't be surprised if it doesn't hold though with $VIX dropping to 18-17 next week.

http://screencast.com/t/YjVlNWYw

Stainless_Steel_Hamster

yes, jailbait vix as i called it

gregn

I am expecting 18 if we break the 20. Touch down on old support and bounce off of support of megaphone bottom: http://screencast.com/t/ZjI1OGY2Y2Y

raised_by_wolves

That would be perfect.

ClutchShorter

WOW, GS support was at $169/$170. Its $168. GS is not participating in this BS rally. Actually, the financials aren't either. I don tknow but I think we're going to see something shortly.

mtvernon

Is GS short Gold or something, that stock looks so ill

Tronacate

I can see it soon....."the emerging currency crises"

bubble jeopardy

a repeat of Japan in the 90's

amokta

http://www.youtube.com/watch?v=qCDRYoHeJgY
insightful market analysis?

Nightwind

Euro going higher but indices are lagging behind? None have broken out of consolidation to match.

Stainless_Steel_Hamster

headfake?

Nightwind

It works on me everytime...I'm a cheap date.

Schwerepunkt

Yes, and it has me confused AGAIN.

centerline

Same for ^TYX

centerline

Interesting that right at 1:00 ^TNX shit itself. I know that there was a 7 yr treasury auction today. Any news here?

Schwerepunkt

Auction went well. BtC was 2.76, yield was lower than before the auction.

centerline

thanks. LQD and TLT spikes noted as well.

tradejane

BtC: 2.758
Indirect: 62.48%
PD Involvement: 27.9%

centerline

thanks!

BalaB

The more the dollar becomes increasingly correlated with the market, the more risk it presents for the ES traders. I've watched it move tick for tick for weeks now. Perhaps, trading another instrument will provide a better risk associated with the reward?

Happy Turkey Day

"Trading In The Pocket"
http://implicittrading.blogspot.com/

raised_by_wolves

Amokta, you could use this for an avatar:

http://screencast.com/t/YmJhOGVi

BigIslandLife

Mole,, did you know you won the ad placement award from TK, he did a post about your blog back one page ago, guess the nuva ring and your shirt got him LOL

centerline

Watching SPX for the last hour should be accompanied with a "fingernails on chalkboard" sound.... screeeeeeeeeeeeeeeeeeeeee.

TomOfTheNorth

herr mole,

Don't think I mentioned but LOVED the ES t-shirts (Snidely Whiplash riding on a black swan...hehehe)

How do I get one?

gregn

Not available yet, he is trying to cut back on the cost by switching to Fruit of the Loom from American Apparel.

TomOfTheNorth

I'm gonna be the first guy on my, er, compound to wear one!

Schwerepunkt

IMF just sold 10 mt of Gold to Sri Lanka. In September, IMF said it would sell 403.3 mt. 200 has been sold to India and 2mt to Mauritius.

What is with these Indian Ocean people?

bshah

little secret.. India is Biggest consumer of Gold... From age old, the theory is gold will always previal... It has... That's why, so many attacks in history has happened on India & Indian sub-continents (called Hindustan) by middle east to loot gold embedded temples, etc.... This is history, so don't jump on war here...

weasel_whisperer

Looks like India is going for the gold:

"The Reserve Bank of India (RBI) may well buy IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are now under negotiation."

http://www.mydigitalfc.com/plan/india-plans-buy...

molecool

Governments are notorious for buying at the top and selling at the bottom ;-)

BigIslandLife

Mole did you see my post re: TK awarding you the winning page design

bubble jeopardy

witness the Brits selling gold when it was $250

molecool

When was that?

bubble jeopardy

here mole -

http://www.timesonline.co.uk/tol/news/politics/...

gregn

As Mole would say, gold was expensive at $250, it wasn't cheap like it is now at $1100+.

gregn

I never heard about that. Thank you. Unbelievable.

bubble jeopardy

Too bad for Buffett that he sold his silver in the mid single digits

raised_by_wolves

Too bad for observingguest that he or she didn't buy silver in the mid single digits . . . or did you?

bubble jeopardy

started buying at $4 and $5

raised_by_wolves

Well done!

tradejane

That was probably the one and only time in my life that I was smarter than Buffett.

bubble jeopardy

ditto here, though am thinking about lightening some of my physical silver here

raised_by_wolves

What about keeping your physical silver and, when there's a trend reversal, hedging with/profiting from put options on SLV?

tradejane

Bingo.

I don't want to sell my loot either, I rather short banks.

bubble jeopardy

I like that strategy relative to gold, trading dzz. Junk silver is just too bulky and obviously takes up too much space in the safe but am watching zsl.

bshah

What I fear, is that if the Gold bubble breaks, and it crashes, India can be in atleast little trouble...

bshah

It can very well.. . January is the season of marriage and every marriage, there will be some exchange of gold (jewellery)... Country can't keep up with demand... People are crazy @ gold & jewellery.. It is status symbol and a measure of family's well being..

Schwerepunkt

After today's 10 mt sale to Sri Lanka, the IMF only has another 191 mt for sale.

Edit: the 403 mt they put on the auction block represents only 1/8th of their bullion reserves.

Schwerepunkt

I am aware of local customs regarding Gold, tied to weddings and festivals mostly. They even eat the stuff, it's called Vark.

bshah

yes sir... on sweets.. and also devoted to god 10 times of that...

Tronacate

They'll all be sporting new grilles.......smile baby.......show us the gold

Stainless_Steel_Hamster

tape looks exhausted

Tronacate

Prechter was right......

Woolly Llama

Like to keep an eye on weird volume and OI. Anyone have any thoughts on >65k contracts traded on SPY Dec 120's both sides?? Deep ITM puts are rather rich with matching call side volume? Weird.

bshah

I don't even see 120 price in scottrade's options view for SPY... why ?

Woolly Llama

b/c Scottrade sucks? lol

Tronacate

In TS you need to format symbol to get all prices

Persian_Gerb

I'll give it a shot...
http://www.voptions.com/bearish_strategies_coll...

(i'm no expert, only pretend to be one).

Woolly Llama

Well I think we can assume they are not selling those puts given how deep they are. If you were bearish, why would you even bother selling the call side for $.08 when you are paying out $9.4? Why not just buy the puts outright? Why so deep ITM?

Mole, thoughts?

gregn

Long term downtrend line update
Big view: http://screencast.com/t/NWUyOWMxNjA
Reaction around line over past week: http://screencast.com/t/OTFkOWQyZT

ClutchShorter

Wow, GS is breaking through $170 support.

elliott_surfs

What's the story? Droppin like a rock

Tronacate

Schwerepunkt......just one more quick question. Was Kuwait stealing oil from Iraq using horizontal drilling ?

Schwerepunkt

That is my understanding based on conversations I and my colleague had with Arab League and USG sources in Washington, at the time.

Edit: But to be totally fair, I think it was probably a case of extraction technology superseding political boundaries, rather than a deliberate provocation. Plus, the same geologic formation crosses the border so even without the directional drilling, Kuwait and Iraq were draining the same field.