The Battle with the Dollar Continues
and Still No Resolution
A Quick Update
Tim Wood
The technical battle of the dollar for survival continues to unfold. The dollar seems to win one round and then the next round will go to gold. It's as if each of these markets understand the importance of this battle and both are fighting to the death. In my opinion, this is exactly what is going on. Only one of these markets is right and there is no second place.
The critical cycle high and low points, which now represent the battle lines, continue to change. Since this battle is so very important and because the levels have changed some since last week, I wanted to give you another update by walking through the dollar chart. Below is a daily chart of the dollar. The dollar is still trapped inside of a trading range that it can't quite break out of. The boundaries of this range are set by the June top at 90.56 and the July bottom at 87.20. These boundary limits are shown in red on the daily chart below. Within these limits are now a couple of sub-boundary limits, which also represent very important support and resistance levels. These sub-boundary limits are also very important for our cyclical analysis.
As I have reported in recent commentary, the July intermediate term cycle low is a pivotal point. From that low we saw the first short term cycle advance for the current intermediate term cycle. This cycle advance failed to exceed the June high, but the decline into this first short term low, the August low, held above the July intermediate term cycle low and that was positive. It is that advance out of the August low that is now at a critical point. Since last week's update, this rally halted on August 30, 2004 at 89.94. So, this now leaves the dollar between the two innermost points. This upper limit now being the August 30, 2004 high at 89.94 and the lower limit being the August 20, 2004 low at 87.73.
Currently this picture is mixed with a positive bias for the dollar. In order for this picture to remain positive, the dollar simply has to hold above the August low and we must see the August 30, 2004 high at 89.94 bettered. Otherwise, the short term cycles will be showing signs of deterioration that could then lead to a much more serious decline in the dollar.
I hope that you can see how this battlefield between bullish and bearish has been narrowing from the levels that are represented in red to the current levels that are represented in blue. This narrowing is going to force a resolution. The limits in red are the primary limits of importance. But, it is the violation of the limits outlined in blue that will provide us with the first clues.
I want to make it clear that it is the understanding of the degree of each of these highs and lows that is so important. The July low was a low of intermediate degree. Violation of that low will likely prove to be extremely bearish while a move back above 89.94 and ultimately 90.56 would be very positive. Until one of these levels is reached the battle of survival for the dollar continues.
The recent price action in the stock market, gold and the dollar has required enormous patience. But, there is opportunity to make money in this environment if we know and understand what the big picture is telling us. This allows us to stay the course in these most difficult periods. I use a unique approach in my market analysis. I employ the Dow Theory, cycles analysis and the methods of other master technicians. The cycles work simply allows for the quantification and segregation of the various moves. The Dow Theory work not only provides the Big Picture backdrop for the stock market, but is also a method for "reading the averages." When these methods are in agreement, it generally pays to listen. I apply my methods to the U.S. stock market, gold, bonds and the dollar in great detail in my newsletter. I also have a special Gold Report available, which I am giving FREE with a subscription to Cycles News & Views. For more details please go to: www.cyclesman.com
5 September 2004
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