Will the Buck Prove For Real?

The S&P and Dow made new highs with the S&P closing on the high at 1804 and the Dow just 8 points off the high at 16063. The NAS, Transportation, and Utilities failed to confirm the highs with the NAS closing just off the Nov 18th high at 3990, Utilities closing well off its Nov 18th high at 7202. Utilities actually performed badly this week closing down Friday at 495. Sentiment is running high on all indicators while the main stock indexes are in fifth of fifth waves now finishing off wave counts at primary degree B. Momentum indicators are diverging on the weekly charts while the volume of calls is twice as high as puts. Stocks are screaming for a top.

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The Dollar performed well against the commodity dollars and the Yen while it weakened against the Pound, Euro and Swiss Franc which closed up on the buck for the week with the pound the stronger of the two. The dollar index retraced the move down from the Nov 8th 81.48 high and bounced off the 38.2% retracement of the move up from the Oct 24th low. The move up from the 38.2 is so far counted as wave one of the larger move up. However, Thursdays and Fridays retracement of the move up has passed the 78.6 and is now just short of the 88.6. If it moves down on Monday passed the 88.6, it would increase the chances that the buck retracing further, changing the immediate bullish 1, 2 count to a bearish C wave with targets at 80.34 equality. The pound closed Friday at 1.6229 shy of strong resistance at 1.6257. This has been a tough handle for the pound to overcome and if it does, it could possibly signal a competitor for the USD in the recent FX atmosphere.

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After retracing the move down from the Oct 25th 1.3833 high at 1.3583 the Euro moved down in five waves on the 19th only to retrace most of it by Friday’s close. It has retraced more than 88.6% of the move. This could mean that the wave 2 minor is not finished correcting and the 1, 2 move down would be a B and C wave with the C wave on its way now. The Euro could then retrace back up as far as the 1.3685 before heading down in a third wave. This is the same scenario that the Dollar Index is in also. The Cad gave up the least ground of the Commodity dollars against the Greenback, however, it is now testing some very significant resistant at 1.05 to 1.6. If the Cad gives this up to the buck, it would confirm the current USD strength and a new dollar trend.

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The 10 Year Yield dropped to the 2.75 Friday. So far the move up from the Nov 8th wave 2 retracement is counted as wave one of three. If the yield moves down passed the 2.74 the count will be invalidated and the move up would then be counted as a B of a flat with the C heading down now with a target around 2.63 to 2.59 area. From there Yields should head up in a third wave past the 3.0 handle.

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Gold and silver lost this week with Gold finishing off 5th waves at minuette degree. It will be interesting to see if the metals correct up from here in a double zigzag or triangle alternate counts for a B wave or fourth wave. Once again if gold falls below the 1206 which is the 88.7% retracement of the larger move up from the June 28th low, then the more immediate one, two impulsive wave count would be the count, making the B or fourth wave retracement complete on the Aug 28th high. The two above counts are the most popular counts. Regardless of which you prefer, the metals are due for a rally. How far the move up will determine the count.

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