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Dollar may be done here - Be careful

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The real amateurs usually forget about the fact that the expected present values of their future lifetime incomes (paid in a fiat currency of your choice) are by far larger than their precious metals holdings. Hence they're not hedging when buying fiat currencies, but instead they increase their risk by mitigating their diversification.

Those kinds of amateurs are strawmen in this context. Most that are savvy about the future of gold and also hold currencies put a lot more of their worth into gold than the conventional 10% or so suggested by the money managers [i'd hazard 50-70% at a guess]. Their "professionalism" consists in not getting overly excited with the prices of the moment and looking to remain emotionally detached towards gold, and then buying with their reserves when the right opportunity presents itself.

 

The near future looks to be chararacterized more by hyper-instability than hyper-inflation, which would be reflected in capital swings between currencies.

 

Anyway, I'm not interested in working most of my life away for future "fiat" income. Part of the allure of gold for me is not the provision of riches, but the possibility of buying free-hold productive property, where I can lead a more self-sufficient life.

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vt

 

are you not concerned that the parameters you are using to look at the $ are too short - looking at weekly charts, i see nothing to get bullish about :unsure:

 

 

Not really...as I look at weekly charts also. Any chart with price only on it will look bullish or bearish at market turning points. I have created a couple of other indicators beyond price which take volume into account on the bid and ask side of things. For me these tell a different story when looked at in conjunction with price...

 

The software developers of the software I use said this of their volume data

 

"As many of you may know the current Volume by Price study calculates the volume at each price increment based upon the total volume per bar. The individual trades and the volume of those trades within the bar are not known since the study is simply based upon the finalized bars. It evenly distributes the volume across each price increment within a bar.

 

We will be implementing a change where we will look at the individual data records in the file to calculate the volume at each price tick for each bar. This change is not so easy, but we will get started on it and hope to complete it within two months. If based on your data settings, you are storing tick data in the intraday data file, this will be quite accurate.

"

 

Basically I receive tick data from the exchange, not the inhouse data alot of brokers use which is not really the "market" so to speak...it does not give true volume.

 

I have found being able to develop volume based indicators has been of great help in finding points of control, equilibrium/disequilibrium between buyers and sellers.

 

Logically the first thing to change before price is volume. In the chronology of a price change, we have this

 

Traders/investors-Decision making-Action-the result of the cumulative actions of all traders/investors is shown first in volume-Then comes price change last. Looking at a chart of price we only see price, which is the resultant force of previous actions.

 

The blue sideways histogram shows volume transactions which I have set at 0.10 increments. Basically between 75.00,75.10,75.20 etc etc...The largest volume area is around 75.50 price level, and in and around this area. The purple/scarlet line is the point of control, where there is much attrition between buyers and sellers. These large POC areas usually mark turning points, support/resistance areas. Now one can ask who has the control in here.

 

 

1259746453_46_UploadImage.png

 

Two other indicators I have came up with seperate a summatic buy and sell volume. Basically rather than looking at volume as one entity so to speak, I split buy and sell volume up using excel linked to the software in realtime to derive the indicators, and take a rolling summatic average of each. This parameter can be changed easily to short to longer term.

 

Now one thing to note is that volume cannot be used as an exact timing tool, price is used for this IMHO...

 

 

The chart below shows the equivolume charts...you can see thicker candles are higher volume, smaller ones lower volume.

 

The first indicator is a running summation of weekly buy and sell volume split. Red is sell volume, blue is buy volume. The one beneath it is the percentage of buy and to sell volume as buy and sell volume by themselves are relatives, or at least they need some relativity which is what the buy volume as percentage of total volume shows. You can see the divergence on the longterm weekly chart. Every rally in the USD has been when this indicator is around 30% of buy volume and lower. However, it is most powerful when divergence is in place....

 

1259747123_72_UploadImage.png

 

This chart shows that the first low in the USD with the green line, buy volume was only 24% of total volume(very low number, sellers are running out of people to sell to?) over a 15 week period. The next low it had risen to 30%, and now a new low, and buy volume is up to 35%...When price exhibits this pattern it means accumulation is taking place over distribution...As can be seen from the chart the sell volume reached an extreme that I have not seen in this 10 year USD bear...

 

1259747536_27_UploadImage.png

 

The most recent USD rally in 2008 (below) last year shows the pattern in full play...

 

 

1259748067_0_UploadImage.png

 

 

Point 1, USD makes a low, buyPervol is 26%,

 

Point 2 USD has a double bottom and buy volume is up to 33%

 

Point 3 USD makes a triple bottom yet BuyVolPercent is up to 49%

Point 4 BuyVolPercent moves above 50% and we have an explosive move up. Accumulation and distribution take a longtime to occur thats why range breakouts and price action need to be used as the timing tool rather than volume itself. Both should confirm each other.

 

Below is thea chart of last years rally with volume at every 0.10 price increment...We had the POC line and heavy volume coming in at 73 area...Using the above analysis of summatic volume and buy percentage volume we can see that accumulation was taking place over distribution. Note at the resistance line around 71 how low the volume was using the blue histogram, and price was bouncing up from this area.

 

1259748443_91_UploadImage.png

 

 

Of course this indicator can be applied to any time frame, and these are weekly charts apart from the last one. For timing we can also looking at the daily timeframe and shorter term volume parameters by changing the summation period to a shorter length...

 

Other points to note are that volume does not have to rise buy volume that is, sell volume can fall anf if buy volume is constant or rising slowly this will effect price also. The sell volume on the USD has reached an extreme and it has started to fall. Any global tremors such as Dubai can be a catalyst for people to stop selling the USD. This is one way I m trying to develop my trading system. I also want to incorporate intermarket relationships.

 

caveat emptor 1: of course price can still continue down, however as long as these patterns stay in play I m going with the probability in favour of a USD rally.

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http://jsmineset.com/2010/01/04/trader-dan...rt-of-the-usdx/

Trader Dan Comments On The COT Chart Of The USDX

Posted: Jan 04 2010 By: Dan Norcini Post Edited: January 4, 2010 at 6:33 pm

 

Filed under: Trader Dan Norcini

 

Dear CIGAs,

 

Take a look at the COT chart of the Dollar linked below. It is extremely overextended internally and if any technical support levels get violated on the downside, a significant amount of long liquidation is going to occur. We got just a taste of that in today’s session as the Dollar came under strong pressure with year-end positioning now completed and managed money taking positions across a variety of markets for 2010.

clip_image0021.jpg

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Funny that the Dollar lovers on here have not yet commented on the above.

 

Can you elaborate on your interpretation of the chart?

 

Do the Commercials' massive short positions stop you buying gold and silver? :)

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Not really...as I look at weekly charts also. Any chart with price only on it will look bullish or bearish at market turning points. I have created a couple of other indicators beyond price which take volume into account on the bid and ask side of things. For me these tell a different story when looked at in conjunction with price...

 

The software developers of the software I use said this of their volume data

 

 

Have looked at your screenshots before and think volume data would be so useful. Which software do you use VT? I take it its not freeware or open source....

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Can you elaborate on your interpretation of the chart?

 

Do the Commercials' massive short positions stop you buying gold and silver? :)

A different crowd and different fundamentals?

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I've not done any thorough analysis on this, but it looks to me like the Commercials have been calling this wrong for 3 years now. They went long the USD in early 2007, some two years before the index bottomed. They were massively short in mid 2008, when the dollar started its climb.

 

I'm a getting this wrong?

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clip_image0021.jpg

 

I found this commentary on the graph above by Peter Degraff http://www.pdegraff.com

 

"The red line follows the 'net short' position of commercial traders in the US dollar. The 'net short' position at the moment is more than 40,000 contracts. This is the largest 'net short' position for at least seven years. In late 2005 the chart shows us a net short position of 30,000. The US dollar [next chart], at about that time topped out at 92 and fell to 71. In late 2008 the net short position reached 35,000. The US dollar back then topped out at 88 and fell to 77.5."

 

"In order for the gold bears to be right, the US dollar is going to have to behave contrary to recent history."

 

"In order for the US dollar to stage a rally from here, the dollar bulls are going to have to do battle with the commercial traders who have a vested interest in holding the line, and are capable [as in the past], to cause the dollar to fall."

 

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pulled from hpc forum.

 

http://www.cnbc.com/id/34820196

 

 

 

Watch from the start until the Soc. Gen. profits warning story starts on falling CDO valuations (although - if that turns you on, watch that too).

 

Then jump to 2 mins 40 seconds in and watch Mr. Bloom again.

 

Telling you like it REALLY is. Wake up.

 

This post has been edited by AvidFan: Today, 12:39 PM

 

The Bulls Are Naked: Currency Strategist

Published: Wednesday, 13 Jan 2010 | 6:11 AM ET Text Size By: Antonia Oprita

Associate Web Producer, CNBC.com

 

The bulls' time has run out as investors start to realize the global economy has a structural problem after bad news such as Societe Generale's profit warning and Friday's US jobs data, David Bloom, head of foreign exchange strategy at HSBC, told CNBC Wednesday.

 

Jobless Rate Will Stay High: Fed OfficialsSociete Generale Warns on ProfitBond Vigilantes Look for Big BaitWhy Job Growth Will Be Painful

"You get one bad unemployment number, you realize that the bears have massive ammunition. The bulls have nothing, they're naked," Bloom told European "Squawk Box."

 

In a surprise setback for the world's biggest economy, nonfarm payrolls dropped by 85,000 in December, a much bigger drop than analysts' expectations.

 

On Wednesday, Societe Generale sent a chill around markets when it warned it was expecting a "slight profit" for the fourth quarter of 2009, way below analysts' forecasts, because of new 1.4 billion-euro ($2.03 billion) writedowns from risky assets.

 

 

 

"Look, this is not over," Bloom said. "There are two types of investors, those with short memories and those with no memories. You have to decide which one you are." :lol::lol::lol:

 

Only investors with no memories will be shocked by this news, while those with short memories will realize that this is a structural problem, according to Bloom. "Good news is only a little bit good. Bad news is awful."

 

But taking refuge in the dollar is not really an option, as last year's rally was actually caused by a liquidity shortage rather than by the currency's safe haven status, he explained.

 

"The dollar as a safe haven status is a poppycock," Bloom said. "The dollar is the problem; it's not the safe haven." :rolleyes::rolleyes::rolleyes:

 

More European News and Analysis

© 2010 CNBC.com

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In another order of things, several central banks said they will stop the emergency U.S. dollar lending introduced during the financial crisis, indicating growing confidence and that the financial system is returning to health past Wednesday; the decision, announced in coordinated statements, involves ECB, BOE, BOJ, SNB, BOC, RBA and central banks of Zealand, Mexico, Brazil and Sweden that said they will let their dollar "swap" arrangements with the U.S. Federal Reserve expire on February. No doubts, this could be the most important announcement of this year, despite market seems not ready to understand the consequences.

 

From - http://www.fxstreet.com/technical/market-v...chnical-report/

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In another order of things, several central banks said they will stop the emergency U.S. dollar lending introduced during the financial crisis, indicating growing confidence and that the financial system is returning to health past Wednesday; the decision, announced in coordinated statements, involves ECB, BOE, BOJ, SNB, BOC, RBA and central banks of Zealand, Mexico, Brazil and Sweden that said they will let their dollar "swap" arrangements with the U.S. Federal Reserve expire on February. No doubts, this could be the most important announcement of this year, despite market seems not ready to understand the consequences.

 

 

From - http://www.fxstreet.com/technical/market-v...chnical-report/

If these swaps unwind over the next month, it means dollars and euros be returned to their respective countries. If the dollars swapped to europe were used to buy treasuries it will mean a lot of "foreign purchases" reverse.

 

The swaps were originally announced as $500 billion, but it was later mentioned by Bernanke that it could be as high as $2 trillion, but there has not been a hard reference to $2 trillion.

 

Imagine what would happen if $500 billion of us treasuries were sold by foreign CB's.

 

 

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If these swaps unwind over the next month, it means dollars and euros be returned to their respective countries. If the dollars swapped to europe were used to buy treasuries it will mean a lot of "foreign purchases" reverse.

 

The swaps were originally announced as $500 billion, but it was later mentioned by Bernanke that it could be as high as $2 trillion, but there has not been a hard reference to $2 trillion.

 

Imagine what would happen if $500 billion of us treasuries were sold by foreign CB's.

 

If you sell 500 billion of us treasuries somebody else gets to hold 500 billion of us treasuries and you have 500 billion to spend and they no longer have 500 billion to spend

 

So what does happen other than nothing? I am not sure

 

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If you sell 500 billion of us treasuries somebody else gets to hold 500 billion of us treasuries and you have 500 billion to spend and they no longer have 500 billion to spend

 

So what does happen other than nothing? I am not sure

erm.. the buyers have to be incentivised to swallow such a large chunk.. so the price drops as in any market. Yields skyrocket..not good.

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erm.. the buyers have to be incentivised to swallow such a large chunk.. so the price drops as in any market. Yields skyrocket..not good.

 

OK but people were saying here yields were negative again so it seems like not much of a big deal so far

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If you sell 500 billion of us treasuries somebody else gets to hold 500 billion of us treasuries and you have 500 billion to spend and they no longer have 500 billion to spend

 

So what does happen other than nothing? I am not sure

So are you saying that in order to be a seller there needs to be a buyer? The only way the system blows up is if there is no buyer at any price? Or something like that.

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I think this is a great summary........... it's good to be reminded of the examples below.

http://www.elliottwave.com/freeupdates/arc...rice-Point.aspx

 

Presented by Elliott Wave International

HOME > CURRENCIES

EUR/USD Breaks Below Major Price Point

Just when everyone thought the U.S. dollar was a goner, it rebounds!

 

By Vadim Pokhlebkin

Thu, 28 Jan 2010 13:00:00 ET Email | Print | RSS | My Updates

BOOKMARK AND SHARE IT!

 

On January 27, the EUR/USD (exchange rate between the euro and U.S. dollar and the most widely trade forex pair) slipped below $1.40 for the first time in six months.

 

In other words, the dollar -- which most analysts considered all but doomed a short while ago -- now stands at a 6-month high against its main competitor. This brings to memory an interesting quote from EWI's president Robert Prechter's May 2009 Elliott Wave Theorist. Bob talks about the stock market, but it applies equally to forex:

 

To anyone not versed in socionomics, everything the stock market does is saturated with paradox.

 

When T-bills sported double-digit interest rates in 1979-1984, investors saw no reason to abandon their T-bills for stocks; when T-bill rates were low in the 2000s, investors saw no reason to put up with the “low yield” of T-bills and sought capital gains in stocks. The first period was the greatest stock-buying opportunity in two generations, and the second period was the greatest stock-selling opportunity ever.

 

— When long-term bonds yielded 15% in 1981, investors were afraid of Treasury bonds even though they were about to embark on the greatest bull market ever; in December 2008, when the Fed pledged to buy T-bonds, rising prices appeared so strongly guaranteed that the Daily Sentiment Index indicated a record 99% bulls, just before prices started to fall.

 

— When oil was $10.35 a barrel in 1998, no one made a case that the world was running out of black gold; but when it was 7-8 times more expensive, some three dozen books came out arguing that global oil production had peaked, a theme that convinced investors to begin buying oil futures…about a year before the price collapsed 78%.

 

— In the second half of the 1990s, the idea that stocks would always be the best investment “in the long run” became popular just as a long period of superior returns was coming to an ignoble end. [As] of today the S&P has underperformed safe, boring Treasury bonds for the past 40 years, since 1969.

 

— Just when nearly everyone -- including world-famous investors -- finally panicked and conceded in February-March 2009 that the financial and economic worlds were in dire shape, the market turned around and shot upward in its fastest rally in 76 years.

Prechter's quote spells out the crucial importance of market sentiment for the trend. Ironically and paradoxically, when everyone gets utterly convinced that the trend is here to stay, that's the time to start looking for a reversal. The "surprising" turnaround in the U.S. dollar is just another example.

 

Now, a sentiment extreme by itself may not mark a reversal; a market can stay overbought or oversold for a long time. What helps to pinpoint a turnaround is Elliott wave analysis. If your charts show a completed Elliott wave pattern AND your sentiment indicators are pinned to the max, a change in trend shouldn't be far off.

Forex analysts blamed the latest euro weakness on "Greece’s and Portugal’s budget crises." (Bloomberg) Sounds bearish, but wouldn't it be ironic if instead of falling further, the euro would now rally? The latest short-term forecasts by our intensive Currency Specialty Service show that it's indeed likely.

 

No, not because things might improve in Greece or Portugal -- because the EUR/USD's Elliott wave pattern is putting in a short-term low. To find out what exactly that means for the pair, read our latest forex forecasts[/url] today.

 

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This confirms it for me, OBL is definitely on the Company's payroll...

 

Osama bin Laden urged an end to reliance on the U.S. dollar as one solution to the global financial crisis and blamed developed countries for climate change, in an audiotape said to be of the al Qaeda leader.

 

CONTINUE>>>

 

Just the kinda message that the US FED and Obama administration would love to pump out themselves...

 

Can't believe he's fallen for the old 'climate change' scam. What a sheeple! :lol:

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COT of the USDX from Dan Norcini from jsmineset.com

 

Commercials currently have their largest short position for years. Would you be betting against the likes of GS, JPM & HSBC etc.

 

usdx-6.jpg

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COT of the USDX from Dan Norcini from jsmineset.com

 

Commercials currently have their largest short position for years. Would you be betting against the likes of GS, JPM & HSBC etc.

 

usdx-6.jpg

 

Wasn't the dollar meant to have been vaporised last month according to Trader Dan?

 

According to Goldman, Sterling should be over 1.80 and crude should be knocking around the $200 mark. I'll pass, thanks.

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USDX bounced off 80 (and the 100dma on hourly chart).

Might end downtrend of last couple of days? I'd have thought this is fairly strong support level.

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USDX bounced off 80 (and the 100dma on hourly chart).

Might end downtrend of last couple of days? I'd have thought this is fairly strong support level.

 

 

Broke down through that. Very powerfully too.

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http://jsmineset.com/2010/02/09/hourly-act...trader-dan-214/

The Dollar was spanked hard today as RISK was back in vogue. Keep in mind that the Dollar has one of the largest, if not THE largest speculative net long positions on record. That does not necessarily mean it is due to collapse but what it does mean is that if any important downside technical levels are violated, a massive wave, and I do mean massive, of long liquidation will take place. This market is so lopsidedly imbalanced on the long side that the sheer weight of those stale longs could drop the Dollar several hundred points very quickly. The action in the Dollar, especially coming on the heels of Jim’s keen observations concerning the recent gathering of the money lords, is very interesting to say the least.

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