US Dollar & Other Currencies

While gold continues to offer no price protection (people who bought in say… 2003 or so might beg to differ ;-) ) for weary casino refugees, it remains the value alternative to a gang of tramped out, played out and frankly, comical paper and digital notes issued by various governments.

These governments have been peddling little more than ‘trust’ since the macro play turned from productivity to a racket of ‘debt and confidence’ somewhere over the last couple or three decades.

For those who care, here is Uncle Buck’s latest status by daily chart.

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US Dollar, daily

A Reverse Symmetrical Triangle has formed, which is normally a reversal pattern, which would mean from up to down.  But USD is at a strong support area and is over sold.

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USD, Euro, Yen, Aussie, Canada, weekly from NFTRH 242

The weekly view shows Uncle Buck still on a bull signal by the cross of the EMA 10 (green) over the EMA 35.  But the Euro broke out of a little topping pattern.  Ultimate upside for the Euro is 142 if it remains bullish.

The rest of the motley crew is self-explanatory as shown on the chart.  Per the chart breakout I bought the Yen via FXY on Monday’s hard pullback, which means I own something that is inverse to the speculative playground that stock bulls have enjoyed for too long now.

As for the commodity currencies of Australia and Canada, the chart says it all.  Aussie especially must find support here or else.

Lots to talk about and talk about it we shall – in depth in the letter – and as the mood strikes out here.  We are grinding out a change of character in the markets.  I want you to remember the bull wise guys that were touting at the exact wrong time with their “it’s a new secular bull market!” and “it’s a GREAT ROTATION out of bonds and into stocks!” (well, they got it half right) bullshit.

Going forward, understand who the promoters are (incl. in the gold “community”) and who the ‘just want to get it right’ people are.  These are difficult markets and anyone touting dogma or pretending to be a genius is going to get ground up.  We are all subject to screw ups (my hand is raised) but it is a clear attitude and a willingness to admit you don’t know it all that will see you through the current environment where everything it seems, is in motion in a frenetic way.

US dollar analysis-turned-screed over.

VIX Volatility Index Updated

Here is the VIX chart from NFTRH 242 along with the words that accompanied it.

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VIX daily from NFTRH 242

The VIX was stopped in its tracks by the bulls and painted another yellow oval.  The hope for bears is that it remains above the 200-day averages or at worst, the 50’s.  If you look closely, you will see that VIX has established a series of higher highs and higher lows out of March.  This is a warning to stock bulls.

Here’s the VIX as it stands now…

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VIX daily, current

Higher highs and higher lows, sneaky as they were, manifested in a hold of the moving averages, which is something the bulls have routinely not allowed to this point.  Yes, I think the character of things is changing alright.

Gold Silver Ratio Updated

A couple weeks ago in NFTRH 241 we reviewed the bullish looking gold silver ratio (GSR) and noted a baby inverted H&S from which it is approaching a measured target.

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Gold Silver Ratio, weekly

A relief phase, where silver out performs gold could kick in at any time.  But then we also note that the big downtrend out of 2008′s blow off top was broken as the little H&S formed and resolved upward.

The bad news is that this indicates liquidity contraction and the worse news is that had better not be a big inverted H&S that has formed because if it is, it’s implication is not at all good for much of anything, including possibly even the prices of silver especially, and gold.  Gold’s value is different from its price.

Price could drop considerably and incredible value could still be retained depending on what is happening around the barbarous anchor.  Please get that concept about gold.

Let’s see if silver gets a turn to lead in the short term, but stay on alert for the big daddy inverted H&S.  It is truly a concerning picture for most investments positively correlated to the economy.  Sort of a gold-CCI ratio on steroids.

Junk Bonds on the Verge of a Signal

Junk bonds (HYG fund shown below) have been hugely popular as casino patrons rushed for yield at the behest of the Fed, which took away yield elsewhere.  Well, now they may be getting it in the form rising Treasury yields (declining T bonds).  It seems counter intuitive that junk would show risk coming OFF, yet T bonds are not benefiting.

That is the screwed up market we have here, with normal signals all put in blender.  But it is safe to say that junk bonds remain an indicator to the will to speculate.

HYG declined to the first notable support at the weekly EMA 30 and is in danger of losing that average.  Next stop would probably be the EMA 100, which supported the Flash Crash hysterics in 2010 and the Euro hysterics last year in 2011.

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HYG weekly chart from NFTRH 241

Volume trends have indicated a rush into junk bonds created by the post-2008 environment that has seen policy makers compel people into risk.  But there has been some huge negative volume the last couple weeks and as we noted in NFTRH, this volume looks more like a kickoff to something than a final capitulation of something because there has been no downtrend from which to capitulate from.