Dollar breakout about to bring some excitement to the markets?

Posted by Chris Kimble on 11/15/2011 at 9:40 am; This entry is filed under Dollar Update.

Of late the markets choppy action has been somewhat boring, kind of like a rocking chair...its keeps you busy, yet you get nowhere!  Is the boring action about to end?

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The Dollar ran into a brick wall of resistance at (1) 6 weeks ago.  Now the Dollar is making a second attempt to get above resistance and its 38% resistance level at zone (2). 

So far a breakout HAS NOT taken place and RESISTANCE IS BACK AT HAND... yet if the Dollar can muster up enough strength to close a couple of percent above the 79 level, the lack of trend of late will come to an end!  

Portfolio construction/positions will be extremely important should the Dollar breakout and will be key to the Shanghai and Commodities (see post here)

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3 Comments

  1. B Ferro November 15th, 2011 at 4:57 pm

    This is purely hypothetical, but what if the dollar up / risk assets down paradigm of the past decade has come to an end?

    Surely we’d have to see it in the technicals to confirm as much but there was a time during the 90s when a strong dollar led to higher asset prices (at least equities).

    One week a trend does not make, but I find it highly interesting that as of late, risk assets have been largely immune to the dollar’s strength…

    Just something for us all to think about I assume relative to our assumptions of what “should” happen.

  2. Tom November 16th, 2011 at 4:58 am

    Chris – AMAZING work you did on Russ 750:
    http://advisorperspectives.com/dshort/guest/Chris-Kimble-111115-Russell-Repetition.php

    Forgiving my ignorance – Over how long a period / or for how long must we bounce up against 750 before you get seriously concerned?

    Thanks For All!
    - Tom

    PS I know we are looking for sustained Russ below 650/600 (?) to confirm serious trouble

    Disclosure: Net Short
    (And never got skilled using stop losses!)

  3. Chris Kimble November 16th, 2011 at 8:53 am

    Tom…Thanks for the kind words and viewership of this blog and dshort.com. How far above to confirm a breakout? Not a written rule, more of a risk tolerance question. I would say a 2-3% close above the 750 level would get close to confirming a break of this pattern is at hand. For aggressive investors, shorting as close to 750 as possible reduces the amount of loss on a breakout. After the post, the Russell got witin 1% of the 750 level, providing a good entry point.

    Chris