Dead Cat Bounce in the Dollar

We all remember when the US Dollar Index took off. Well maybe not. It had been moving in a channel for 2 years and was at the bottom of that channel in June of 2016. From that low it meandered a bit until it reached the top of the channel in November, just a few days after the election. Remember the narratives of how the new administration would be great for the Dollar?

Shortly after it broke the channel to the upside and ran to multiyear highs in December. But that was all. Even before the inauguration it had started moving lower. It started in a falling wedge and then broke that wedge to the downside earlier this year in May. After a retest of the breakout area in June it started lower again, this time much faster.

The fall continued to a bottom in September. This retracement was a 113% extension of the leg higher. The bounce from there had real legs. It moved back over its 50 day SMA later in the month. But last week, as it was about to make a higher high, the Dollar Index printed a Shooting Star candlestick. It was confirmed as a reversal Monday by a lower close and continues to lower as I write.

Momentum is also shifting back lower with the RSI failing as it crossed 60 and reversing, and the MACD about to cross down. It may reverse again and move to a higher high of course. But for now this is a text book definition of a Dead Cat Bounce. The chart really looks like the picture doesn’t it?

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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