CHARTING TRENDS: Dollar Bottom In April, Or April Fool
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15:30 ET
=DJ CHARTING TRENDS: Dollar Bottom In April, Or April Fool
28 Jan 15:30
By Stephen Cox, CMT
A Dow Jones Newswires Column
NEW YORK (Dow Jones)--The pitfall of technical analysis - and of any other
market analysis technique, for that matter - is the fact that if you look hard
enough you can always find what you're after.
But there's a converse law as well. It says that the hardest thing an analyst
can do is to believe the compelling things he sees in the chart.
It seems that the month of April is shaping up as an important time target
for the dollar and for related commodity futures. The technically weak dollar
may find a prominent bottom in April and commodity futures will apparently find
a top simultaneously. Confirmation of that prospect, by several related
markets, is hard to dismiss. For that reason, watch these markets closely - and
objectively.
The nearby U.S. Dollar Index, which is near 99.50, is pointed down to the
94.61 - 91.34 support band, within which 93.87 promises to be an important
number. The wide support band is likely to be tested before the end of April.
It's remarkable then that commodity futures prices, which typically move
opposite the dollar, are, conversely, targeting technical resistance in April.
The CRB index in mid-December completed a large bullish double bottom
formation on the monthly chart when it moved above 234.38. The breakout implies
that the index, now trading around 244.50, will test 265.41 by the end of
April.
As usual, there are qualifications. Notably crude oil futures, which may be
radically effected by war in the Middle East, are now floundering under
technical resistance.
Indeed, by April, Nymex nearby crude oil, which is now trading around $32.60
per barrel, may be testing $38.82. However, the contract has been unable to
take out resistance at the December high of $33.65, and its technical momentum
is slowing. Nearby crude is technically strong above $30.98, but the market is
growing more vulnerable to a dip towards that level. In that case the resulting
slowdown of the uptrend could easily nullify an April bull market target.
Finally, the gold futures market, to the extent that it enjoys status as an
inflation hedge, should be watched closely now. The Comex nearby contract is
headed up to $400.40 per ounce. And yes, an April time target for a test of
that target works in this case.
The point is that gold futures are a reminder to be wary of any market setup
that looks too good to be true.
In fact, nearby gold is very near a potential top at $379.80. And on Monday
the contract recorded a high for its two-year bull market, $372.90. The Feb.
contract, now trading around $370.00, given it's current rate of uptrend, will
test $379.80 very soon. If the CRB Index tops out roughly at the same time,
then I'm liable to be wrong about a slide of the dollar until through next
spring.
For more technical analysis see: Dow Jones Newswires, N/DJTA; Telerate, page
4247; Bloomberg, NI DJTA; and Reuters key word search "Charting Markets".
-By Stephen Cox; 201-938-2064; stephen.cox@dowjones.com
(Stephen Cox, a chartered market technician, is chief technician for Dow
Jones Newswires.)
Data by Bridge\CRB
(END) Dow Jones Newswires
01-28-03 1530ET |
