Two of my favorite markets so far this year are crude oil and gold. It’s as if a memo went out in the first week of 2014 and the crowd started buying these markets. One background positive for commodities and energy markets is a bearish technical picture for the Dollar Index.
The Dollar Index started tracing out a bull channel after putting in a low in May 2011. It broke down last September. A test of chart support at 78.92, based on the lows spanning September 2012 to February 2013, attracted buying in the first half of November and the market has since been stable. But there isn’t any basing activity to suggest a sustainable uptrend is underway. Rally attempts have failed to follow through. If 78.92 support were to fail, DXY would enter an air pocket until a potential floor at 74.17, derived from turning points and congestion from 2008 to 2011.
I don’t treat this chart as a guarantee that the greenback will cascade immediately; trends often take time to evolve. Rather, bearish technical conditions from an intermediate-term perspective support the case for more gains in crude oil and gold from an intermarket perspective. Elsewhere, copper hasn’t been riding the same train and doesn’t look a high-probability trade to me on either side of the market.
Good trading, everyone!
