DXY (Weekly)

The longer term picuture renders a bullish “look.” In terms of classical pattern reading, this looks
like a very large “rounded bottom” with an insipient inverted Head and Shoulder formation. In
order to confirm these bullish pictures the market must keep moving higher. For instance, taking
out 80.26 would be bearish. In the much longer term, taking out 75 to the downside would be
horrible for bulls. It would imply a much different count in the works. It would mean that all of
the price action the last several years was just a period of congestion before a monster leg
lower. For now, though, the bullish picture appears to be the correct one. We remain 40% of a
maximum long position. Only a Weekly close below 80.26 would force us to completely
exit the trade.

Right
Shoulder
80.26
Left
Shoulder 75.00

Head

Andy’s Technical Commentary__________________________________________________________________________________________________

 DXY (Weekly) The wave count very much fits the bill of what Neely calls a “Neutral Triangle.” A “neutral” is one
in which the “c”-wave is the longest and most complicated (enduring) leg. The “e” wave of a
neutral should conclude in the vicinity of the “a” wave, thus the ‘neutrality’ of the triangle. The
other aspect of neutral triangles is that the legs should NOT have a Fibonacci relationship.
Looking at the daily and weekly close, that is the case here.

“b”
(A) “d”

“e”?
“a”
“e”?
(B)

“c”

At this point, the main question is whether or not the “e” wave, and thus the (B)
wave, have yet concluded. It’s “allowable” for the “e” to take longer to complete.

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (180 min) “d”
e
88.71 The target of the Head and Shoulders pattern has
now been achieved perfectly and there seems to
be a completed formation present. If this is
Left correct, then we should be witnessing “bottoming
Shoulder
action” this week. DXY bulls must first break the
Right steep down trend line that is in place.
Shoulder

Head
REPRINTED from 8/1/2010

a
d

f
c

e
g
“e”
(B)

8/22/2010 NOTE: We should probably file this slide somewhere as an example of

a nice Head and Shoulders pattern coming to fruition. So, the H&S is certainly not
‘dead,’ but it can probably only be achieved on smaller time scales like this one.
And, I don’t remember any MSM discussing this one…

Andy’s Technical Commentary__________________________________________________________________________________________________

 “d”
e Dollar Index (180 min)
88.71

The rally from the 80.08 level was the sharpest and most severe of the decline.
This confirms the idea that a wave of some kind has concluded. I had
previously been counting the decline as a seven legged “diametric,” but it’s now
better counted as an orthodox “double zig-zag,” a different kind of seven-
legged correction. The subsequent rally is taking the shape of an “impulsion,”
which has bullish implications over the next few weeks (at a minimum).
-b-

(2)
-a- x
(4)
-1- or -a-
(1) (5)
(3) -b-
(5)
(2)
-c- (3)
w
(4)
(1) [2]
-a- (4)
(3) (1)
[1]
[4]
(2)

[3]

[5] of (5)
-c- of y

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (30 min) (5)
[5]?

[3]?

[b]
(3)
[5] [d]
[3] [4]?
[1]
[.5]
[.3]

[2]
[.4]
[a]
[4]
[.1] [e]
[c]
(1) (4)
[5] [1]

[x] [.2]

[3] [2]
I don’t normally like to look at waves on this small of time scale because there tends
[y]
to be “noise” with the overnight sessions. This is a very interesting wave
(2)* development with a few different ways to consider it. This counting adheres to the
[4]
most number of “rules” of wave theory. One of the interesting implications of this
[1]
[w] model is that the wave (1) and (3) were of nearly equivalent height, which means we
should expect the Wave (5) to be the extended wave. The target of that move would
be 84.60-84.80
[2]

* Wave (2) was a “double combination”

y

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (30 min) ~ Uber-Bullish Model
(1)
[5]?

[3]?
-1-
This is not an
(5) impulse.
(3)
[4]?
[1]
[3]

[2]

[4] (4)
-2-
(1)
[5] [1]

[3] [2]
This might be another interpretation of the waves. It would be an extraordinarily
bullish model. The reason it’s not my “preferred count” is that any proposed Wave -2-
[4] here would be of an “unknown” structure to me. I cannot fit it into a legitimate wave
form. Also, the Wave (2) would be very abbreviated in terms of duration.
[1]
(2)*

[2]
*The Wave (2) seems WAY too brief.
y

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (30 min) ~ Bearish model

(b)
[.5]

[.3]
-a-
(5)
(3)
[a]
[.1]
[.4]
[3]

[.2]

[4] (4)
[b]
(1) (a)
[5] [1]

[3] [2]
Here’s the model the bears are hoping for--that we’re seeing an “expanded flat” -b-
and we have a good strong (c) wave lower coming. A break of 83.44, the 138.2% of
[4] (a), should negate this bearish model/hope.

[1]
(2)

[2]

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (180 min) ~ Head and Shoulder Bottom?

It would be interesting if the head and shoulder top from several weeks
ago led to the inverse bottoming pattern now. If this is the pattern, then
the market should NOT get back below the “dashed” blue line. The target
for this formation would be the low 86’s. It’s possible that the red line at
83.45 could form the neckline as there is resistance at that level.

83.45

Left
Right
Shoulder
Shoulder

Head

Andy’s Technical Commentary__________________________________________________________________________________________________

 Dollar Index (60 min) ~ Support zones

We are long the dollar and so the concern is in identifying critical support zones. The first
level of support would b the 82.50-82.54 level which is the 23.6% retrace of the entire
recent bounce and the 61.8% of the most smaller leg higher. A break of this zone would
force me to reduce my long DXY exposure back to 20% from 40%. If an “impulsion” is
forming from 80.08, then this market would have no business ever retracing more than
61.8%. So, medium term traders should use that retrace as “key support.”

Andy’s Technical Commentary__________________________________________________________________________________________________

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