The Dollar index has been on a steady decline since mid-February and is currently one of the least loved asset. While price has drifted lower, the momentum readings have not matched the price lows.
Dollar Index - Daily Charts
If we went back to the 7th Feb blog post on the Dollar Index (from where there was a small bounce), the Index is trading SLIGTHLY below that medium term trendline. All these line up well for a bear trap. If the currency basket closes above 77.25, I will be brave to venture a long here.
It is also time to have a look at the charts of crude given the amount coverage it has been getting over the last few weeks.
Crude - Daily Charts
While there are no visible signs of exhaustion or reversal here, there are some early warning signs. The volume for these contracts has been dropping over the last few days. If we have a higher close for one or two sessions and then a mild/sharp sell off day, one of my synthetic indicators is likely to flash a sell signal at least for the short-term. The most important signal, I see here is that there is hardly anyone who is NOT BULLISH or does not expect $150-$200 crude. In fact, one famous author of a commodities book, who had been bearish on many commodities including crude is expecting $200 crude now!!!! Let me warn you here. I'm not trying to say it is time to short crude here. In fact,It is suicidal to out guess the market. A good trade practice is to be prepared around important pressure points, wait for the reversal and if we have one, evaluate the risk-reward and then pull trigger.
