Thursday, October 9, 2008

Is the dollar rally over?

I'm starting to think we may have seen the top of the dollar rally. This was always a counter trend rally in an ongoing secular bear market. I thought it would probably last at least a year like it did in 05. However the dollar has now met all the requirements to put in a top. It's now overbought on the weekly chart. The magnitude of the rally is similar to the last rally. More importantly the dollar is now facing major resistance in the form of the declining 200 week moving average.

On a cycle basis the dollar is now on week 12 of the current 19 week cycle. We should have anywhere from 5 to 9 weeks to the timing band for the coming low due in Nov. or Dec. Unless we see surprising strength today or tomorrow the dollar is going to end the week with a solid black candle. That's often a sign of a top after a long intermediate move. Perhaps the strength in the mining stocks yesterday is a signal that the dollar is ready to resume it's bear market. That should be a big plus for gold and miners and I suspect it will be a short term positive for the general market.

Of course if one thinks that the FED printing dollars by the truckload to bail out the financial system is somehow a positive for the dollar then maybe the secular bear market is over.