Dollar Index (Weekly) with 13/34 Weekly Moving Average

While I’m still not the biggest fan of MA analysis, we need to give these
indicators their “due.” The 13 and 34 Week simple moving averages have
done a good job of providing support and resistance for the DXY. The 13/34
“Cross” has also been good at “confirming” trend changes.

Trend change
confirmation

Trend change
confirmation?

Using the 34 Week MA as a “guide,” the DXY bulls won’t have a problem
Trend change until that blue line gets taken out (low 78) I would expect this average to
confirmation
provide good support on any dip. Additionally, as we will see on the
next pages, there are other technical reasons while the low 78 area will
be solid support…

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Weekly) Using “classic charting” techniques, it’s pretty clear that the 77.69 to 78.33
zone is now support for whatever “e” - wave decline we might witness. This
“b” area was the scene of several important inflection points in the past two years,
so the market will have memory of these prices. Additionally, 77.86 is the
(A) 61.8% retrace of the (A) wave advance--it’s amazing how many times (B)
waves eventually conclude around that retracement point.

“d”
z?

x y

w x
78.33
w x 77.69
“a” “e”
x (B)
y

74.33
z of “c”

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Daily)
“b” Over the last couple of months, we had two main targets for price and time. It was suggested that
89.62
because the “b” wave lasted a “brief” 54 days, it would be nice alternation for the “d” wave to last at
least 88 trading days. It was also suggested many times that 81.70 would be a nice target for the “d”
(A) because it would be 61.8% of the “b” wave. From the “orthodox” low on 12/3/09, the 88th trading day
was 4/8/10. The market close at 81.66 on that day, 4 ticks away from the price target. These price
and time projections rarely come out this perfect, so I’m expecting the market to surprise me in some
-b-
other way, but the fact is that counting this entire move as a triangle for the last several weeks
yielded a price and duration target of 81.70 on 4/8/10, exactly where the market finished.

Wild stuff….

“d”
z?
81.66
-a-
y?
x

-b- x?
w?
-a-
-c- x “e”
77.69 w -b- (B)
“a”
x?
-c-
y
-a-
74.33
-c-
z of “c”

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Daily) ~ A “Triple Combination” Concluded?
“d”
-c-
(c)
z
y -e-
-g- 81.91
81.34

If the “diametric” labeling of y-wave -a- (a)

makes one queasy, then consider -e-
it a “double” of some kind.
(b) -d- If a triangle did finish here, the
market MUST “collapse” now,
thrusting out of the triangle.
-c-
-f- x2?
w -b-
-a-
-c-
-d-

-b-

I’ll be the first to admit that the wave structure off the Dec ’09 lows is another strange and
unusual pattern, similar to the overall pattern on the S&P from the March ’09 lows. What
-a- 76.60 I can say for certain is that it is IMPOSSIBLE to label any of the larger advances as
-b- x1 “Impulsive” (five waves). Therefore, the move off the Dec ’09 lows MUST be a correction
of some sort, which fits quite well with the larger picture model (Slide 2).

I would like to end this “d” wave at the 81.91 high on 4/8/10 for the reasons cited on the
previous page. This would be the count that concludes the move on that point.
Admittedly, it’s a bit “forced,” but it actually works OK and does adhere to logical wave
counting principles. The overall wave structure would be considered a “triple
combination” in that it was a move containing two x-waves and concluded with a triangle.
This will be a very easy model to disprove: 81.91 must now hold as resistance.

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Daily)
“b” So, how can we synthesize these various thoughts into a trading strategy?
89.62
The longer term picture/trend on the DXY remains bullish, so longer term traders (er,
“investors”) should continue to hold bullish bets on the US Dollar. However, because of the
(A) short term risk of a correction to 78, it might make sense to be holding only 25-33% of a
maximum long position, with an eye toward adding length on any pullback to 78. Shorter (C)
term traders can attempt to short the DXY, but it would seem prudent to use 81.91 as a “stop
loss” on short trades.

“d”
z?
81.91
y?
x

x?
w?

w x “e”
77.69 (B)
“a”
x?
y

74.33
z of “c”

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Weekly)
“b”
89.62
This model has been excellent for giving us a feel for medium term direction,
so we will stick with it. While the DXY has clearly stopped going higher, one
(A) cannot say it has shown signs of a “reversal.” It looks like to be just
congesting nearer the highs, typically a signal that another new high is likely.

REPRINTED 3/10/2010
“d”
Z
81.70?
y
x

x
w

w x
77.69 “e”
“a” x (B)
y

74.33
z of “c”

The “b” wave lasted 11 weeks (54 trading days) on this chart and was very “brief” in comparison to the “c” wave
that followed. It would make sense for the “d” wave to be longer lasting to provide some “alternation.” For
instance, it if were to be 161.8% of “b”, that would make this “d” wave 88 trading days long for an 18 week move.
We’re currently on trading day 67, so maybe another 2-3 weeks to go?

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (Daily) Wave “c” has ended and we’re are now in the middle of wave “d” of a
larger triangle. A good target for the “d” would be 81.70, which is
61.8% of the “b” wave. (As with most triangles, the alternating legs
will be related by a Fibonacci number.)
“b”
89.62

(A)
-b-
REPRINTED 1/17/2010

“d”
-a- 81.70
x

-b-
w/a

-c- -a- x
77.69 w -b-
“a” “e”
-c- x/b (B)
y -a-
74.33
-c-
z of “c”

Andy’s Technical Commentary__________________________________________________________________________________________________

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