Wheee! Whoopie! Wheee! Kneel and Give Praise! Janet Yellen, Queen of the Doves, is gracing the Senate today seeking confirmation as the new Treasury Secretary, replacing Mnuchin. She gets to sign the currency that the Federal Reserve (the Eccles Building is her old stomping grounds) is printing like crazy.
A group of NYSE floor traders are up all night long folding $100 bills into little green origami roses. They drove to Washington, DC, to lay the origami roses along the pathway that Yellen will walk on her way to the Senate at 10 AM EST. Yellen's fans hope for old time's sake, that she will wear the dove suit one more time and fly around the room dropping money. The world is awash in central banker liquidity. Now Janet targets the Treasury. The bulls are happy and the easy money wine is flowing like water on Wall Street as the holiday-shortened trading week begins. Since Yellen will be spouting the need to spend, spend, spend, touting the $1.9 billion fiscal stimulus package, while telling everyone to ignore the rising debt, so the dollar weakens.
Yellen smartly had new taps placed on the bottom of her shoes and each time she is asked about the debt she will leap over the wooden bench and perform a tap dance that Ginger Rogers would envy. She also learned a few magic tricks to distract the ADD-afflicted senators. Lastly, she has smoke bombs and mirrors in her handbag that she will resort to only if the questions become teste and remain focused on the rising, out of control debt. Whenever Yellen appears, at the Fed in the past, or now, and in the future as Treasury Secretary, the SPX would be expected to pop 25 or 30 points and futures are up +28. VIX 22.75. The dollar is weaker down to 90.48 because Yellen, Queen of the Doves, is in the house. All Praise, Honor and Glory to Our Money God's! Kneel and Give Praise!
Keystone called the bottom in the dollar; the only analyst to do so. Everyone was triple-leveraged short the dollar at 89 a couple weeks ago and most are holding those positions. What pattern do you see now? And its not the upward-sloping channel. What else do you see? Keystone will tell you below but first a recap is in order. You need to learn how to fish not simply receive a fish dinner. Right? Speaking of fish dinners, the firehalls and churches are already saying that the pre-Easter Friday evening fish dinner fun in cities and towns across America, will not occur again this year. Covid is a bastard planning on ruining Easter for a second year.
The green lines show the positive divergence forming to begin the year as 99.9% of Wall Street keeps proclaiming to go short the dollar with quintuple leverage. Traders and investors see, and most-importantly, expect, copious amounts of fiscal stimulus courtesy of Jan and huge ongoing gifts of monetary stimulus from Jay, so stocks will rally higher and higher (as Wall Street predicts with SPX targets this year at 4500, 4600 and higher) while the dollar weakens. It is an obvious scenario to play out but rarely does the market work out the way the consensus thinks; in fact, it never does.
The RSI and stochastics were overbot agreeable to a bounce in the dollar. The lower band was violated so the middle band and upper band were on the table and price claims both levels. The upper band is violated now so a move back to the middle band, the 20-day MA, at 90.05, is on the table. The dollar is soggy this morning, because of the Yellen show today, at 90.48.
The ADX pink box shows that the multi-week trend lower in the dollar was about to be called a strong trend lower but alas, the ADX slumped over, like a man knifed in the back at the dinner table, his face landing in the gravy, so this was a hint that a bottom was forming. The ADX is down at 18 showing that a strong trend does not currently exist. Price is stumbling sideways like a drunk in Times Square on Saturday night. If the rally continues, watch to see if the ADX climbs above 28-ish which would indicate that the move higher in the buck is a strong trend higher (sustainable).
The Aroon red line is overbot and green line oversold which are maximum bearish conditions. The dollar wants to move towards bullishness (higher) so look for the potential positive Aroon cross. Remember, a stronger dollar will send commodities, gold, silver, oil, and the broad stock market lower. The dollar strength is what creates the sogginess in stocks last week. This week that weakness in stocks would be expected to continue but Yellen is out and about this morning glad-handing everyone making promises that boatloads of dough are on the way.
Which brings the dollar story up to date. Trading is always about what have you done for me lately? The upward-sloping channel is in play and you see price making higher highs and higher lows respecting the channel trend lines. Price taps the top trend line which is also the upper standard deviation band so it is no biggie that the buck pulls back this morning to 90.48. The pullback this morning is definitely due to dovish Yellen but these two parameters help push the greenback lower as well.
The interesting part of it all is the chart indicators. They are all long and strong in this daily time frame (green lines). This forecasts higher highs in the dollar after any pullback occurs on this daily basis. You see the 50-day MA at 91.11, and dropping, which is a logical upside target. The 20-week MA resistance is at 92.14 (see a weekly chart) so that is a logical upside target. This 90.75-91.00 range is strong price support/resistance going back to early December so keep an eye on this pivot point (the dollar will have strong upside legs if it breaks up through here).
Okay, so what is the potential pattern currently? You could have cheated since it was placed in the title line; a two-leg bull flag. You can annotate it on, say a one-month duration chart which makes the pattern easier to identify. First leg is from 89.30 to 90.50, you can play around with different numbers depending on if you use the closing prices or intraday highs and lows, which is 1.20 difference. Price consolidates for a couple days (typically, for the two-leg bull flags, you would like to see several days of sideways to sideways lower consolidation) and begins again from 90.00 which would target 91.20, however, the dollar is pulling back this morning to 90.48 and may retreat a bit more over the next couple days. At any rate, price will likely begin the second leg higher from 90-91 so that targets 91.20-92.20 range.
Regardless of the tap-dancing that Janet performs, and she is no Ginger Rogers, although even she would admit there will never be another Ginger Rogers, the dollar would be expected to shake off the ongoing naysayers and continue higher. The long and strong indicators point to higher prices on the daily basis. The dollar weekly chart was set up with possie d as well which is why Keystone was so confident that his bottom call was correct, and it was, as other traders scoffed, throwing oranges and tomatoes at his delicate noggin, demanding that he leave the stage at once. The crowd was wrong again. Trading is a lot about timing so obviously Wall Street is saying the weak dollar is a longer term trade, however, in the long term you're dead. That is fine and dandy as long as you are prepared for several weeks of dollar upside as per the possie d on the weekly.
More up in the dollar is expected. There may be a couple days of sogginess due to the Yellen parade today but the charts say up (which remains completely opposite of the 99.9% consensus on Wall Street expecting a weak dollar now and going forward). Any new unknown news will obviously impact prices. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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