CTKEO - Dollar Index on trendline support - Gold
Dollar Index is on trendline support of the "Symmetrical Triangle". I touched on the triangle previously here: http://scottpluschau.blogspot.com/2012/04/mature-balance-area-on-s-500.html and here: http://scottpluschau.blogspot.com/2012/04/dollar-index.html
The Dollar Index has been zapped to its High Volume node on both the 30 minute chart and the Daily chart. This futures contract has potential for Vertical Development. This triangle is ripe in my opinion. An igniter move lower on a surge in volume may send the longs trapped in the recent Open Interest rushing to the exits which can intensify the price action to the downside if the longs are weak hands using leverage. The strong handed commercials have been consistently on the short side of the contract when viewing the latest COT reports.
The tabs at the top of the blog discuss my interpretation of Open Interest and the COT report.
What type of impact will the Dollar Index have on other futures contracts? It is no secret that I have a passion for trading the metals. In my opinion Gold needs to breakout of its downward sloping channel on the daily chart, which would also put it above the high volume node on the daily chart, putting pressure on the short side of the open interest trapped beneath it. Explosive moves can begin happening in a scenario such as these in my experience.
A breakdown in the Dollar Index does not give me a signal to trade gold. Each auction is traded independently. Only a signal in gold would trigger a trade in gold.
The important part of my trade plan is to wait and react accordingly. Failed patterns and whipsaw are increasing probabilities with the chairman speaking today along with a FOMC forecast and meeting announcement. I am sorry I don't have a live chat room up and running for this.
These two charts are definitely worth keeping an eye on.
(Click on charts to expand)
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Source: http://scottpluschau.blogspot.com/2012/04/ctkeo-dollar-index-on-trendline-support.html
