12-13-2018: March U.S. Dollar Index: Troubles in Other Countries Push It Higher

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

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Introduction

Recent reluctance on the part of the Federal Reserve to maintain its current rate tightening cycle as fast as previously planned, provides opinion that the U.S. may be sliding into recession, due to incredible mismanagement of the economy for the long run on the part of Republicans. But no matter how uncertain it gets with ridiculous Trump tweets sending a really bad signal to markets all over the world, it appears to be getting worse overseas. The U.S. Dollar still seems to be one of the best places to park money, despite its out-of-proportion inflation rate (or deflation of Doillar buying power) relative to most other world currencies, at least for now.


Intermarket Analysis

We fed the U.S. Dollar Index, Treasury Bonds and Treasury Notes into a neural network to get the following result:




Parabolic Chart

March U.S. Dollar Index:

Parabolic Chart


Nirvana Chart

March U.S. Dollar Index:

Initial Chart


News Analysis

The Dollar may lose some safe haven potential because of renewed U.S./Chinese trade talks. There was a slight downtick in a recent release of the Producer Price Index for the U.S.

The Dollar Index is near a one-month high supported by a rebound in U.S. Treasury yields and weakness of the Pound as it gets battered against uncertainty about Brexit. Long-term U.S. Treasury yields bounced back from three-month lows. Brexit talks are headed seemingly toward a dead end. British Prime Minister Theresa May delayed a pareliamentary vote on her Brexit deal. May's parilamentary colleagues believe they have sufficient numbers to mount a no-confidence vote in her leadership.

The Chinese yuan firmed on news that Beijing and Washington were discussing the next steps in their trade talks. U.S. President Trump said he would intervene in the Justice Dept.'s case against a top executive at China's Huawei Technologies if it would serve national security interests or help close a trade deal with China. China agreed to cut tariffs on U.S. cars and auto parts from 40% to 15% according to a Trump official.

Ongoing dovish comments from Fed officials and soft U.S. data are further reinforcing views of a slowdown in the Fed's tightening cycle.

The top three currencies in the U.S. Dollar Index which account for 83% by weight have been inflated at about half the rate of the U.S. Dollar over the last ten years. A reclkless monetary policy in the U.S. caused emerging market currencies toi coilklapse in proportion to how much their supply their currencies has been inflated relaive the the supply of U.S. Dollars. The U.S. Dollar supply has been inflated itself abvout twice as fast as the top three currencies in the Dollar Index. The supply of money itself and how long the printing presses are running is a factor often overlooked in comparison to the more obvious influence of interest rates.

Much of quantitative easing wound up as excess reserves in the banking system, which does not affect circulating money supply. Still, consider the supply of Japanese Yen increasing at 37.5% over 10 years versus 84.4% for the U.S. Dollar in the same period.

Some analysts are predicting 52.00 for the Dollar Index looking beyond an all time low of 71.33 in early 2008. This would likely be accompanied by doublt-digit annual inflation both in and out of the U.S.

A stock market selloff isn't affecting U.S. consumption much as job growth remains strong and wages go up. This is a reminder that the stock market is not the economy.

A potential selloff in Turkey's currency has investors worried about potential contagion from the U.S.' NATO ally and prospective Europen Union member.

Uncertainty and random tweets from the U.S. President provide significant fear, uncertainty, and doubt to already addled markets. U.S. and Canadian trade talks are a key catalyst to Dollar weakness.


Point & Figure Chart

108.5|                                                                  T 12/11
     | ICE - Mar-19 U.S.Dollar Index, Idx X $1000  Cm.=0.06  Lim.= 0.6
     |
     |
     |
106.0|_________________________________________________________________________
     |                                X
     |                                XO
     |                                XO
     |                              X XOX
103.5|X_____________________________XOXOXO_____________________________________
     |XOX   X                       XOXOXOX
     |XOXO  XO          X           XOXOXOXO
     |XOXO  XO          XO          XO O OXO
     |XOXOX XO          XOX         X    O O
101.0|XOXOXOXO__________XOXO______X_X______O___________________________________
     |XOXOXOXOX   X     XOXOX     XOX      O
     |XOXO O OXO  XO    XO OXO    XOX      O
     | OX    OXOX XO    X  OXO  X XOX      O
     | OX    OXOXOXOX X X  OXO  XOXOX      O
 98.5|_OX____OXOXOXOXOXOX__OXO__XOXO_______O___________________________________
     | O     OXO OXOXOXOX  O O  XOX        O
     |       OX  OXOXOXOX    OX XOX        OX
     |       OX  OXOXO OX    OXOXOX        OXO
     |       O   O OX  O     OXOXO         OXO    X
 96.0|_____________OX________OXOX__________OXO____X____________________________
     |             O         OXO           OXO    X
     |                       OX            OXO  X X
     |                       O             OXO  XOX
     |                                     O O  XOX
 93.5|_______________________________________O__XOX____________________________
     |                                       OX XO
     |                                       OX X
     |                                       OX X
     |                                       O  X
 91.0|__________________________________________X______________________________
     |                                          X
     |                                          X
     |                                          X
     |                                          X
 88.5|__________________________________________X______________________________
     |                                          X
     |                                          X
     |                                         O
     |
 86.0|----|----|----|----|----|----|----|----|----|----|----|----|----|----|---
                       111         1111      1    1
      333334445666688990021223566781122123449122380
      011130011001212120200021002230000012022201020
      688916969250325729235320984904959550547285183
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical low and a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "DCV" (Daily Cumulative Volume). It is giving a sell signal.

Internal Printout 1 Internal Printout 2

Results of "Daily Cumulative Volume" for U.S. Dollar Index (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $1,000. Initial margin on a single contract is $1,815. Use of options is advised.


Historic Range

Scale trade sellers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to down is imminent near a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) U.S. Dollar Index September 96 Put and Sell (1) U.S. Dollar Index March 98 Put @ 0.23 to the buy side or less.
These options have zero open interest and U.S. Dollar Index options as a whole have almost no volume, few bid/asks, so getting a trade off will be very difficult.


o 1 o 2 o 5


Calendar Spread

What the Mar. - Sep. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down in the long run. The best time to enter or leave the above spread is when it is at +0.94 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at +1.15 or wider buying the far as prices are rising and then selling the near. At this time, we appear to be at the sell the far, buy the near point.





Level Table:

Level Table

The path of least resistance is up.
 98.0|                                                                  R 12/10
 ICE - Mar-19 U.S.Dollar Index, Idx X $1000  Cm.=0.06  Lim.= 0.6
     |
     |
     |
 97.0|_________________________________________________________________________
     |
     |AYYZZ
     |AAAYYYYZZZZ[   <<<
     |AAAAAXYYYYZZZZZZZZ[
 96.0|AAAAAAAAXXXYYYYYYZZZZZZZZZ[[_____________________________________________
     |AAAABXXXXYYYYYZZZZ[[
     |BBRWXXXXXXYYYYZZ[
     |BRRSSWWXXXXXXXXYY
     |BBBCRRSSWXXXY
 95.0|BBBBCRRRSSVVVWWWWWX______________________________________________________
     |BBBBBBCRSVVVVVWWWX
     |BBBBBBCRSVVVVVVVWWWW
     |BCRSSSTTTVVVW
     |CQRRSSSTTTTTVVVVVWWW
 94.0|COOPQRRRRRSSSSSTTTTTTTTVVVWWW____________________________________________
     |COOOOOPPQQRRRRRSSSTTTTTTUUUW
     |CCNNOOOOOPPPQQRSSSTTTTUUU
     |CCCCNNNNOOOOOOPPPQQQQQRSSTTTUUUUUU
     |CCCCCCDEMMNNNOOOOOOOOPPPPQQQQQQQQSUUUUUUUUU
 93.0|CCCCDDEEMMNOOOPPPPPQQQQQQUUUUU___________________________________________
     |CDDEEMMMNOOPPPPPQQUUUU
     |CDDEEMMMMMNPP
     |CDDDEEMMMMMMNNP
     |CCDDDDDELMMMMMMNNNNN
 92.0|CCDDDDDELLMMMNNNNN_______________________________________________________
     |CCDDDDDDDELLLMNNN
     |CDDDDDLLLL
     |CDDDLLLL
     |CDKLLLL
 91.0|KKKKLLLL_________________________________________________________________
     |KKKKKLL
     |KKL
     |K
     |KK
 90.0|KK_______________________________________________________________________
     |KKK
     |K
     |KK
     |JKK
 89.0|JKK______________________________________________________________________
     |FJ
     |FFHHJJ
     |FFFFGGGGHHHHJ
     |EFFFFFGGGGHHHHHHJ
 88.0|EEEFFFFFFGGGGGGGGHHHHJJJJJ_______________________________________________
     |EEEFFFFFGGGGGGGHJJJJJJJ
     |EFFFFGGGGHHJJJ
     |EHHH
     |EHH
 87.0|EE_______________________________________________________________________
     |EE
     |EE
     |E
     |
 86.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.279
       1 1                                       1 1 1 1 1           1
       2 2 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 8 9 9 0 0 1 1 2           2
       1 2 1 2 0 2 1 2 1 2 0 2 0 2 0 1 0 1 3 1 2 1 2 0 2 0           1
       3 7 1 6 9 6 2 6 0 4 8 2 6 0 5 9 2 6 0 4 8 2 6 9 3 7           0


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 12/12 ).

Intraday Chart





Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart + 1
Nirvana Chart + 1
News - 1
Point & Figure + 1
Cyclicals - 1
Seasonals - 1
Internal System 1 - 1
Internal System 2 0
Third System + 1
Historic Range - 1
Commitment of Traders + 1
Range/Volatility - 1
Level Table + 1
Other Factors + 1
Total + 2
Place 8 March U.S. Dollar Index on a Buy Watch with stoploss @ -1.09 below the get-in point when recent price is represented as "96.73".
____________________________________________________________________________________________________________________________________________C.T.