Wednesday April 2, 2008 - 13:19:10 GMT
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Black Swan Capital - www.blackswantrading.com
A Wave View of the Dollar
John Ross wrote about the nasty head fake made by the euro on Monday. Mr. Market loves that gameâ€”and so do the forex dealers. Clean out those stop-loss orders above the market, then away we go. Ahhâ€¦big advantages there are to seeing all the cards face up, as our illustrious (no commission of course) FX houses do. Who needs commission when you got â€śspreadâ€ť and a look at the hands on the table! Thus itâ€™s just one of the many dangers one encounters trying to play this game on an intraday basis. And why we continue to try and stretch out our time frames if possible.
And as we stretch out the time frame of our dollar view, we are increasingly warming to the idea that an intermediate-term bottom, at least, may be in place for the dollar, as CRAZY as that may sound too many. And if that is the case, the dollar could bounce, or maybe move enough to call it a rally, higher than now expected. (Disclaimer needed here: We warmed in this manner a couple of months ago and got whacked.)
Based on a wave view of the US$ Index below (and not trying to get to cute), a bounce to 7500-7800 could be just a correction in the longer term downtrend. Of course we never know when what we perceive as a correction will morph into a full-blown major trend change without hindsightâ€”a gift we continue to search for.
[Chart not available in text format]
Of course if this proves wrong, the next extension low for the dollar index is near 6800. But if this proves right, a US$ index move to 7800 (or +7.8% from current levels) equates to a euro-$ of around 14400. Now that would be quite a head fake indeed!
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