Fellow traders, full disclosure I never trade the dollar nor hold any open positions. However, for GLD & SLV and the indices the DXY matters relative to its inverse relationship with the former and off & on directional relationship with the latter. The COT report (not attached) is showing that institutional hedge funds (aka smart money) are increasing their long positions in the dollar on a weekly basis. This activity typically precedes a reversal if you look at past dollar declines. Also, a potential market top and exhaustion isn't far off and we often see dollar strength during retracement of the indices. Perhaps all of this is converging soon for a DXY rally.
RED wave is more bearish for the dollar portending that the final down wave has begun. BRIGHT Green wave suggests we may be bottoming and the major wave 1 to the downside is complete. Both outlooks follow a complex correction and compressed impulse wave when DXY was range bound.
Personally, I think the green wave coupled with a complex bottoming formation is a higher probability. Given that smart money may come in now with heavier positions. This would discourage the bears who are trying to force a breakdown that would be a final wave 5 (red scenario). That seems less likely as we are near a market top zone and the smart money is also showing a net short position on the COT in gold. It looks more like a stand-off zone where commercial hedgers aren't going to take another dramatic move against their contrarian positions. However, the RED scenario can still happen which would be bullish for metals, EEM, euro and likely the indices.
Looking forward to watching it play out, completely unbiased!
RED wave is more bearish for the dollar portending that the final down wave has begun. BRIGHT Green wave suggests we may be bottoming and the major wave 1 to the downside is complete. Both outlooks follow a complex correction and compressed impulse wave when DXY was range bound.
Personally, I think the green wave coupled with a complex bottoming formation is a higher probability. Given that smart money may come in now with heavier positions. This would discourage the bears who are trying to force a breakdown that would be a final wave 5 (red scenario). That seems less likely as we are near a market top zone and the smart money is also showing a net short position on the COT in gold. It looks more like a stand-off zone where commercial hedgers aren't going to take another dramatic move against their contrarian positions. However, the RED scenario can still happen which would be bullish for metals, EEM, euro and likely the indices.
Looking forward to watching it play out, completely unbiased!