On Feb. 6, the dollar tried to turn on a good near-term reading for the square of 9 at 18dg and for those of you who understand angles the 18 marker carries the same significance as a 180dg marker. I told our clients if that was violated for any reason, it wouldn’t drop just a little but it meant the underlying strength of the drop, which is invisible on the surface, would reveal itself and the Greenback dropped from 80.63 to a low now of 79.99, which is a lot for a chart like this in only five days. But now the Dollar has a 45dg drop off the recent high which carries a lot of weight and if we do get this turn to party will stall for lots of commodities including the precious metals. But that won’t mean the party is over. It’s hard to judge but we’d need several quick distribution days across the board in equities to actually have a chance to get a low in March as opposed to another top and I’ll believe it only when I see it.
Chances are this week won’t be as kind to equities or precious metals as last week. But we’ve seen new highs in tech, which is good enough to confirm the end of the correction from January. Then again, it is also possible, although not probable, that equities goes up together with the Greenback.
In addition to watching the dollar, which has a good chance for a turn, you should pay close attention once again to the BKX which is sorely lagging and not even close to a new high. If you are bearish this market, you’d have to pin your sagging hopes the BKX loses it. But lagging a rally isn’t the same as going in the opposite direction. It’s only a warning sign in the same vein the CAC is leading to the upside over in Europe. This market is wild because while the banking index is lagging badly, housing is finally hitting a new high for this sequence and very close to the high from last May. If you’ve been paying close attention, you know housing barely budged to the downside in January and several in the group actually broke out just after the rest of the market bottomed. We don’t see that very often. But the fact the HGX and BKX are so far apart is something to be monitored, and we’ll only get a better picture when the market stalls off its recent better action.