Dollar & Oil both Dropping



…biggest one-day slide against euro

OPEC deepest oil cut to rescue prices…


Let the charts do the talking…

Dollar falls, Crude up

The US Dollar violated the 50-day moving average for the first time in five months while the Euro Dollar crossed back above its 50-day moving average during the same period of time. Crude oil was up 10% as it closed above $48 a barrel and the ETN I highlighted from last week is now up 30% from its low. I do own 1/3 of my position in DXO but I can’t say I caught it below $3. I highlighted the three investments last week in a post titled:

12/02/08: Dollars, T-Bonds and Crude Oil

I started to mention Oil as a possible value buy in November:
11/26/08: Oil a Value Buy?

Here’s what I was thinking:

I mentioned my idea last week: Crude Oil ETN’s. My wife and I have agreed to start purchasing a stake in crude oil investments, starting this week with a 25% purchase of our fully anticipated position (DXO is the instrument). The crude oil charts have not turned positive and I have not received any buy signals such as the ones I highlighted in the dollar earlier this year but I am viewing this more from a value perspective rather than technical. Maybe I will strikeout big time but I am swinging for it anyway.

Too many Middle East talking-heads want to cut production and raise the price of oil. Maybe I am extremely early to this “rebound/ bottom-picking game” but I can’t seem to reason how oil will stay low for long (talking years here, not a short term position).

It will be fun to see how this plays out.

US Dollar Buy Signal

Well, I am fresh off of my Europe trip and ready to study the charts this week. I’ll start by posting a few charts of the US dollar. I have talked about these buy and sell signals in the past and wasn’t surprised to see this pattern upon my return. I was witness to the USD gaining some strength over the past few weeks while traveling. The large chart shows that this is the first true buy signal in more than 3 years (2005).

12/17/07: US Dollar Snapshot

UPDATE: You can trade the USD like a stock by buying the long or short ETF:
Long: PowerShares DB U.S. Dollar Bullish (UUP)
Short: PowerShares U.S. Dollar Bearish (UDN)
I will cover these in an additional post later this week.

The metals have been weak; especially Platinum and Gold (see this February post, 02/18/08: Platinum Climax Top?, where I highlighted the climax top in Platinum). I’ll admit: these things take time but typically work out if you stay with the signs and have the patience to pounce when the move begins. The signs started in February but didn’t give the signal until July.

Platinum Climax Top?

Platinum futures are up more than 600% over the past 10 years and have almost doubled from 1,200 to 2,053 over the past twelve months.

What catches my eye is the extreme run-up over the past two months as the metal seems to be making a climax run (out of character during the 10-year up-trend). Similar action started to happen in PTR and I highlighted it in the exact manner as I am doing here with $PLAT in a post titled The Real PTR Climax Run.


Petrochina, currently trading at $150, is now 50% off of its high of $266.81, a number reached during the climax run. I was a little early with PTR when I wrote the post Petrochina (PTR) Climax Top? back in September 2007.

Based on my PTR analysis, wait for the breakdown in Platinum to begin prior to picking a top, if it even happens. This is a game of odds and we can’t be 100% certain that Platinum is going to breakdown and correct by more than 20% over the next six months. However, I will establish a position when the ideal entry presents itself. The ideal entry could be a large reversal on heavy volume while making new highs early in the day and/or week or it could be a series of large down days on increasing, above average volume.

I do want to be clear that I am not suggesting that the long term multi-year run in Platinum is over but a correction of more than 20% may be in the works.


What do you think?