The death cross occurs in technical analysis when the 50-day moving average (MA) falls below the 200-day MA. The golden cross occurs when the 50-day MA crosses up through the 200-day MA. Generally speaking, the death cross will lead to multiple weeks of doom and gloom while the golden cross leads to weeks of upside.
However, as mentioned, there is a little jog that occurs first to set off the festivities. This is fully expected and anticipated for those that understand the pattern. When a death cross occurs, price will typically bounce for a few days or week or two flying in the face of doom and gloom but price will then roll over to the downside again. If the death cross remains in play, price will continue to weaken for many weeks forward.
When a golden cross occurs, price typically drops for a few days or couple weeks flying in the face of the joyousness that was supposed to occur but price will then reverse and rally going forward for many weeks as long as the golden cross remains.
The euro golden cross occurs first and you can see how price pulls back for a few days then shot higher again. That was a cheesy pullback, however, and a more substantive relaxation in price would have been expected. The US dollar downdraft is relentless so that plays a big roll in sending the euro higher (and visa versa). Each currency owns about 60% or more of each other's money in their baskets so the dollar and euro typically move inverse to one another.
Hence, the death cross occurs for the US dollar with the 50 stabbing down through the 200. A bounce is expected in the dollar and the green lines show she is loaded up with rocket fuel ready to launch (positive divergence). The tiny red lines are weak and bleak reflecting the gloom the last couple days so there may be a couple days of chop before the fuse is lit to light the dollar rocket. The falling green wedge is a bullish chart pattern.
As the dollar rallies in the daily time frame going forward, the euro will pullback and perhaps provide a more substantive retreat in price before it bounces again and decides if the golden cross will remain in effect.
The dollar/yen chart is shown above and it is the same chart as the dollar and this currency pair is expected to move higher like the greenback in the daily time frame. Then as time moves along, you can watch to see if the death cross remains in play, if so, the dollar will continue to weaken.
The Wall Street pundits and analysts are devoting lots of time to dollar predictions over the last few days. Well, Keystone never shies away from forecasting; it is a speculator's bag. The US daily chart says the dollar will rally beginning now or early next week.
If you bring up the $USD dollar weekly chart, it's nasty. The RSI, MACD and ROC are weak and bleak wanting lower lows in the price of the dollar on the weekly basis. The histogram is positively diverged and stochastics are oversold and agreeable to a bounce on the weekly basis. The histo and stoch's on the weekly will conspire with the daily chart to provide support for the rally coming on the daily basis.
The US dollar weekly chart likely needs a couple jog moves in price to set the indicators up with possie d and a multi-week rally. Thus, 1 week up, then 1 week down, then 1 more up, and 1 more down and then perhaps the bottom on the weekly chart with possie d, say, mid-February. A multi-week dollar rally will likely begin in late February and continue through March which should be a good month for the greenback moving higher.
If you bring up the dollar monthly chart, wow, what a drastic move off the top with price receiving the neggie d spankdown. The chart is ugly. The chart indicators are weak and bleak wanting lower lows in the dollar on a monthly basis (long-term). The stochastics drop through the 50% level now in bear territory. There is nothing good to say about the dollar monthly chart.
Thus, assembling the time frames in this multi-dimensional currency chess game, the dollar will begin rallying any day forward and this will continue for a few days through next week at this time and perhaps trickle into the week of 1/23/23. The dollar will then roll back over and die coming back down for lower lows in price say by the end of the month. It will chop a bit as it finds a base on the weekly basis then begin a multi-week rally higher starting, say, mid-February. You don't have to guess. Simply watch the weekly chart and wait for the indicators to ALL set up with positive divergence and you will know it is time to begin the multi-week rally.
Once that rally on the weekly basis runs its course, say from the end of February and through March, the long-term ugliness returns for the dollar. In the April timeframe, dollar weakness will return if it is not already there and the dollar will trend lower into year-end.
The coming rally on the weekly basis will likely be a good trade to bring on since the universal consensus is doom and gloom for the dollar (and it should be as the year moves along but not for February and March which should see the dollar stabilize and rally for a few weeks). If you are a day-trader or nimble trader, you may want to play the pending dollar rally on the daily basis, which should begin at anytime, for a quickie long trade. Do not marry the trade since price will roll over again due to the further weakness needed on the weekly chart. Keystone is not trading any currencies long or short right now. 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.
Note Added 7:51 AM EST: Nomura analysts proclaim that the euro is going to 1.10 and then 1.16 by the end of the year. USD 102.49. Euro 1.0806. Dollar/yen 128.62.
Note Added Sunday Morning, 1/15/23: USD 102.18. Euro 1.0828. Dollar/yen 127.88.
Note Added Wednesday Morning, 1/18/23: USD 101.83 lowest in 8 months. Euro 1.0816. Dollar/yen 128.55. Bitcoin 20.6K.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.