Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar and Crude Oil…The Inflation / Deflation Battle Rages On

Commodities / US Dollar Nov 04, 2013 - 12:31 PM GMT

By: Rambus_Chartology

Commodities

There were some interesting developments this week that I would like to focus on in the Weekend Report. The most important thing to happen was the rebound in the US dollar that was very impressive. Is the bottom in or is this just a short covering rally that will peter out when it's finished? Oil continues to fall at a rapid rate which could be signaling another deflationary event maybe on the horizon. There are still a lot of crosscurrents out there but if we can get a good read on the US dollar and Oil that should help us understand what is likely to take place over the intermediate term.


I have a ton of US dollar charts I would like to show you so lets look at some of them and what they're showing. First, lets start with the eleven point Diamond that broke down in September of this year and had several backtests to the underside of the bottom rail before it moved lower. The US dollar had a strong counter trend rally this week which is now trading right back up to the backtest area at the apex of the Diamond. This is a critical area where the confluence of the support and resistance rails are focused like a laser beam at one point, the apex. If the US dollar can trade above this critically important area that would be one for the dollar bulls.



This next chart shows when the US dollar put in its top at reversal point #9 gold was putting in a nice bottom that led to a 250 dollar rally that shows the inverse relationship is still working. As you can see last weeks rally in the US dollar put gold on the defensive.



This next chart is a longer term look that shows the Diamond and our rally from last week as a backtest so far. The red and green circles shows where the 50 dma and the 200 dma have crossed over giving buy and sell signals. As you can see the dollar is still on a bearish crossover at the moment.



Next lets look at the old original expanding triangle which led to the Diamond pattern. As you can see the bottom rail is still HOT after all this time as this is where the dollar is getting its bounce. This recent low at reversal point #10 completed the ninth reversal point which is telling us it's a reversal pattern to the downside. In order to get the 10th reversal point completed the dollar would have to rally all the way up to the top rail to compete the 10th reversal point putting the expanding triangle back into a consolidation pattern to the upside if it breaks through the top rail. Expanding triangles like this tells you the volatility is getting to extreme levels as each swing is getting bigger and bigger suggesting the dollar is getting out of control. Right now the dollar is testing the brown shaded support and resistance zone from below which is its first real obstacle to moving higher.



I have to give this next chart to the bulls as they have managed to trade above the support and resistance rail that I have to label as a false breakout for the time being. If the dollar bulls can get the price action above the brown shaded support and resistance zone, directly overhead, that would be another positive development for the bulls.



The reason the dollar chart above is so important, especially with the support and resistance rail, is because of what the implications are if the S&R rail can hold support. I've shown you this next chart many times in the past that shows the big picture for the dollar. Notice the thin black dashed line on the far right side of the chart that is the support and resistance line from the chart above. If this critically important line holds it will put the bigger picture of a strong US dollar back into play. The dollar would need to take out the thicker S&R rail to really create a strong move to the upside. So far the thick down sloping S&R rail has held resistance on several attempts by the dollar to breakout.



This next long term monthly chart shows the US dollar breaking below a 2 plus year uptrend, black dashed line, that has formed within the completed downtrend channel at reversal point #5. Is this just a backtest move to the thin dashed line or something bigger?



Lets look at weekly chart for the US dollar that shows a bearish rising wedge that has broken down. A complete backtest would come in around the 82 area.


Lets look at one last chart for the US dollar that shows the very long term look that shows a potential very large H&S top pattern. I really don't expect this chart to play out but in a worst case scenario, if inflation was ever to go hyper, then this chart would probably play out and gold would go to the moon. You can see why our latest support and resistance rail, that had the false breakout to the downside and has reverse back up above that important rail, is so critical to the big picture. We are at junction city USA.



So far what the US dollar charts are showing us is that it's time for the bulls to step up to the plate and break through all the overhead resistance rails to turn the dollar back up into an uptrend. The ball is in their court right now.

Now lets look at the most important commodity on the planet which of course is Oil. We shorted oil when it broke down from the support and resistance rail as that showed me a creditable top was in place. So far the price action is moving down in reverse symmetry to how it went up this past summer on the daily line chart.



Lets look at the same top using a bar chart that shows us Oil created a red bearish falling wedge that is approaching a short term price objective down to the 92.71 area. This would be a good place if one wanted to take some profits.



Before we move on I want to show you how the false breakout, that I attributed to the Syrian crises, looked like the real thing at the time as the price action broke above the 2 1/2 year top rail of the blue triangle. Everybody and their brother saw that breakout but when I looked at it from a different perspective I seen something totally different. First the blue triangle with the false breakout.



Below is the weekly chart I showed you where I used horizontal trendlines for the top and bottom of the big trading range. Doing this gave me a much clearer picture of what was really taking place. Many times horizontal support and resistance zones gives one a clearer picture even though the tops and bottoms are not specific points but more of a zone, thus the brown shaded support and resistance zones I often show. As you can see Oil is now working on a possible 5th reversal point in a rectangle which would put this rectangle into a reversal pattern if the price action eventually breaks through the bottom brown shaded support and resistance zone.


This is what the rectangle would look like on a very long term chart of oil. If this rectangle turns out to be a 5 point reversal pattern and breaks out to the downside I think the deflationary scenario I've been looking for would come to fruition.



I want to show you one more long term look at oil, that I've been showing for a long time now, that has yet to materialize but with the recent weakness its starting to get interesting again. This chart shows a massive H&S top pattern that has teased me several times in the past when it would approach the neckline. Note how many times this neckline has been tested over the last 5 years or so. I look at this very long neckline as the line in the sand between deflation or inflation. If the neckline can hold then the inflation scenario will have merit and the inflationists will have a shot at being correct. On the other hand if the neckline gives way to the downside then the deflationary hole will open up like a black hole that will suck in everything that isn't nailed down.



The GASO chart shows it's approaching the bottom rail of a 5 point rectangle.



Lets turn attention to the old CRB commodities index that shows us, after trading sideways since July of 2012, it's now starting to show some weakness as it's getting close to making a new lower low.



The GNX commodities index.



JJA agricultural index.



You can use your imagination on what this next chart tells you about the battle between inflation or deflation.



The battle still rages on between the inflation camp and the deflation camp. This has been going on ever since the bull market started for the precious metals complex. If we're going to see deflation come to the forefront then the US dollar bulls will need to step up to the plate and rally the dollar above some of those close by resistance rails just overhead. Buy the looks of most of the charts above deflation still seems to be in the big picture going forward. How long it takes to really get the ball rolling is anyone's guess but we seem to inching closer to the inevitable tipping point. How the precious metals complex does is still unclear yet as that sector is still in a trading range which could breakout either topside or through the bottom. I suspect the PM sector will initially fall in the first round of deflation but then turnaround before everything else like it did in 2008. The US dollar will be our biggest clue going forward so that's where I'll be keeping a close eye. All the best...Rambus

Gary (for Rambus Chartology)

http://rambus1.com

FREE TRIAL - http://rambus1.com/?page_id=10

© 2013 Copyright Rambus- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rambus Chartology Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Parviz
06 Nov 13, 10:02
Proof of Deflation

As everyone knows, I am a huge deflation advocate. Here is another brief but excellent article and charts on the subject:

http://finance.yahoo.com/blogs/the-exchange/is-disinflation-bullish-for-the-stock-market-181003064.html


Post Comment

Only logged in users are allowed to post comments. Register/ Log in