The Dollar Rally Isn’t Fading Just Yet
Feb 11th, 2009 | By Charles Delvalle | Category: Chart of the DayThink back hard for a few seconds… to the days when the dollar was the most hated asset in the world. In those days, the dollar was joked about, the euro was rapped about, and everyone came to the conclusion that the buck was history.
I guess those were the good old days, before the credit crisis renewed the world’s faith in the dollar.
Today if you take one look at the chart of the U.S. Dollar, the only thing you see is strength.
This is a chart of the U.S. Dollar Index ($USD) which charts the dollar’s strength against six major currencies. The first thing that you’ll notice is the dollar’s 22% move from 71 to around 86.
But the second and more interesting development is a new bullish diversion.
A bullish diversion occurs when an indicator such as the Slow Stochastic is showing a move from overbought (80 or above) to neutral (50 – 80)… while at the same time the stock does not really drop in price.
If you’ll notice, the Slow Stochastic has been dropping since the middle of January. Yet the stock price has remained virtually flat. This is a bullish diversion in its purest form.
Typically when you see this happening, it gives you an early indication that prices will move higher. If this bullish diversion is right, then we could very well see the dollar rally past its peak at 88 and go past 90 by the end of the year.
For you FOREX bugs out there, taking a long-term bullish position in the dollar should pay you greatly by the end of the year.
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
