first majestic silver

Dollar Breaks Out

Technical Analyst & Author
October 30, 2017

Yesterday saw one of our most important predictions become reality—the dollar broke decisively out of its Head-and-Shoulders bottom. We can clearly see this breakout on the latest 6-month chart for the U.S. dollar index shown below. Fundamental reasons for this are believed to include the current (weak) trend to higher rates in the U.S., and perhaps more importantly, the euro starting to unravel if Catalonia succeeds in its push for independence from Spain. Whatever, this chart says the dollar index is going to advance to our target in the 97 area.

The importance and validity of this breakout is emphasized by dollar proxy UUP also breaking out yesterday on the highest upside volume for many months.

A big component of the dollar index is the euro, and not surprisingly the euro broke down from a Head-and-Shoulders top yesterday that is the inverse of the Head-and-Shoulders bottom in the dollar. The European Union is threatening to fall apart, and if Catalonia succeeds in breaking away from Spain, it is likely to close the lid on the euro's coffin.

While gold and silver valiantly struggled to hold up yesterday, the same cannot be said of precious metal stocks, and the Market Vectors Gold Miners ETF, GDX, dropped away quite hard, so we can expect gold and silver to follow suit as the dollar rallies.

Finally the Gold Miners Bullish Percent Index shows that there is still quite a bit of bullishness waiting to be wrung out of the sector. Those long PM stocks should hedge their positions and the most cost effective way to do this is via Puts in something like GLD, which have good liquidity. With inverse ETFs you can be swindled out of your due gains as they often do not perform as they should. GLD November or December 118 or 119 Puts will serve the purpose. Or if you are nimble you can simply step aside and buy back cheaper when the dollar rally has run its course.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

Disclosure:

1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
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Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com


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