with Anthony, ZigZag & Platy
Andrews pitchforks are one of my favourite tools to use. At the moment they are aiding me in my examination of the USD. I have previously posted a chart showing the current USD with an Andrews pitchfork projection. What we can see is that the price has now breached the upper median line. When this happens the correct technical method is to draw a parallel line to the upper median line. This line is now used as new resistance within a time frame of 2-3 days.
On further examination it appears that the dollar rally in not quite done, however we are very close.
Many followers of traditional technical analysis will see that the upper target has made a new high. So, what would happen if we made an intra-day high above what looks like to be a double top then closed below it. Well, it would intra-day look like a breakout and then by the end of the day look like a double top. So those going long a breakout would then be left holding the bag at the close, those looking at it from a double top perspective would then go short thinking its a double top and when it reverses to new highs be left holding the bag……again. The dollar is a very sneaky entity.
I believe with all the talk regarding the breakout of the 10yr downward sloping trend-line this breakout to new highs will be a prime opportunity to fade the dollar for a few days into the end of May early June time window. The sliding parallel demonstrated as the orange line on the chart is issuing a high in the region of 22.88. The Fibonacci resistance and support lines have been drawn from this projected high to the low in May. This should then provide a projection of the low into the late May early June time window as highlighted by the yellow line. At this point i believe that it will provide the platform for an assault through the 1oy downward sloping trend-line.
Ofcourse this also means that on Tuesday when the market reopens after Memorial Day we are likely to have 1 more day of dollar upside (equities weakness) before the dollar moves down. Therefore my current long trade is likely to be hit in the very short term before moving up again where i will exit and go short the equities market. Suffice to say that my original projection to the upside was rather bullish and therefore the lack of bounce to the upside is telling me that the move coming to the downside is going to be extremely deep and fall to levels wiping out all of 2012 gains. (Not my gains ofcourse 😉 )
From a time cycle perspective it is clear that the latest USD Natural Cycle projection has inverted however it does fit in very nicely with the overall outlook for the dollar into late June. With a move down in the dollar into late May early June then the dollar begins its ascent into late June.
The volatility bands for the USD are also indicating there is a little more upside at 22.91 not far from the projected 22.88 outlined by the Andrews sliding parallel median line.
I did mention yesterday the key level of support for the S&P 500 was 1318, on Friday the S&P closed at 1317.82. So we are now below that key level and should push to the downside for a day before moving upwards again into late May and retesting the downwards sloping resistance line and Andrews pitchfork outlined in the chart posted yesterday.
Its important to note at this stage that the cycle projection below is a de-trended projection therefore it appears that the June 4 low is THE low. However, when the market rolls over again it is important to use this projection as a time based projection rather than a trend and price based projection in other words the lows are lows within the downtrend and the highs are highs within the downtrend. So rule 101 always use time cycle projection charts within the context of the trend which is DOWN.
Next week i will be discussing the projected target for a high in the Wednesday-Thursday time window and also outline my expectations for a major wave 4 low. I will also be revisiting the AstroCycle and also the astrological outlook in terms of Venus’ retrograde transit into late June and how i believe this will affect the markets.
Until then have a great weekend