By Jerry Furst - Sr Analyst “1st on Forex” -  Investors Education Network.com

The Dollar Index and Gold

The Dollar Index has a history, and indeed the charts show we have been at and below current levels before. So now the question is, Will price “Bounce or Break” off of familiar levels?

Looking at the Charts of the US Dollar Index and Gold ETF

US Dollar Index (Symbol DX - eSignal) Monthly and Daily Charts

US - DX: The Monthly Chart (click to enlarge) gives us a text book lesson in Fibonacci retracements and extensions. The Trade Weighted Index made a double bottom which coincides at the 75% Fibonacci retracement level .

Drawing the Fibonacci retracements from the 1993 low to the 1994 high gives us a 38.2 retracement that held the March 2009 high of 89.60 and the 138.2 Extension 0f 70.70.

So this monthly chart looks ominous as a drop to the 1993 lows looks possible.

US - DX: The Daily Chart (click to enlarge) of the US Dollar Index shows  the decision point quite clearly. We have extremely strong support at the current level of 76 - which is a 75% retracement of July 2008’s low to the March 2009 high.

78 Would Be Great - 72 What Would You Do?

We can now Bounce or break off of this level - with targets of 78 for a bounce up to the 61.8 Retracement - OR - a drop down to retest the July 2008 low of about 72.

GOLD - GLD ETF - October 9, 2009 Makes Weekly All Time High

GLD - The Weekly Chart above (click to enlarge) shows the GLD Gold ETF shows some text book lessons for technical analysis. The GLD ETF hit a high of 104.15 while spot Gold traded at over $1,060 an ounce.  

 An inverse Head and Shoulder pattern with a broken resistance “Neck Line” and a Triangle Pattern at the Right Shoulder that is already in play is heading towards the 125% Fibonacci Extension of 108. This would correspond with Spot Gold prices of about $1,100

The Head and Shoulder Pattern has a target at approximately 120, that is convergent with a significant Fibonacci extension of 161.8%  This would correspond with Spot Gold prices of about $1,300

 The Headline Indicator - Explained

The front page of the Financial Times on Thursday Oct 8, 2009 featured the US Dollar Index “as fear grows over currency”.  There is a fundamental-news type indicator that is sometimes quite handy to keep in mind of, the concept being: “If it’s on the front page of the paper and on the lips of people that rarely speak about it… it’s probably over bought - or oversold.

My trading methodology is what I call 90% technical-charting and 20% Fundamental-News but exponentially weighted. (meaning that the fundamental news has a half life of 5-30 minutes for things like GDP reports,  and even Non Farm Payroll - Unemployment Numbers).

Headline Surprise - or Expected?

The Headline Indicator has different connotations that traders pick up on after a while. If there is an  unexpected event of either extreme negative or positive news that has no precedent, and no one knows just how bad the repercussions can be - then the Headline Indicator may be a catalyst for an extreme move yet to come. However, if Walmart (for example)  is picked to be the “Stock of the Year” and it is seen on the checkout line of your favorite shopping place - the likelihood is that it’s made a top.

US Dollar Down - But Not Out!

So, in conclusion: Yes - the US Dollar is being shed - but perhaps it has been punished enough for now, and a retracement is in order. As for Gold, well the paper money has to go somewhere - and hard commodities that are easily exchangeable might just be the new currency of choice for a little while.

The question really is….. Where would you park your money?

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

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by Jerry Furst Sr. Technical Analyst at Investors Education Network

Technical Analysis Explained - at The Right Edge… But 1st…

Lately there has been so much Fundamental News going on I have writers block - I don’t know what to write 1st! So I decided to break the blockage by just doing a Technical Analysis lesson on chart patterns, rather than get into the BRIC Meeting that took place in Russia, being attended by the contested leader of Iran, or how the TIC data showed China has started selling, or how Ken Lewis CEO of  Bank of America told congress he was forced by the Fed and Treasury to take on Merrill Lynch, or how… well here’s the TA…

June 16, 2009 as the European Session opens we have some really nice examples of Technical Analysis - Chart Patterns on the 4 Hour Charts.  It’s worthy to mention that the 4 Hour Charts will be a good guide for the “Intermediate Term” Forex Trader.

You can then trade the shorter time frames accordingly! - Just Follow the Charts

Rounded Top

GBP-JPY 4 Hour Chart Shows Downward Trend Continuing after Completing a Rounded Top

“M” Pattern - Double Tops - Failed Inverse Head and Shoulders

AUD-USD 4 Hour Chart Shows a Double Top and ”M” Pattern May Be Next. Note that the “Inverse Head and Shoulders” failed to break the “Neck Line” and bounced back down to the “Top of the Head”.

Twin Peaks - Possible “M” Pattern

GBP-USD 4 Hour Chart Shows “Twin Peaks” or “Double Top”. Look closer and you will see a “Head and Shoulder” Pattern on a 30 Minute Chart that may propel this chart further downward to complete a “M” Pattern.

Head and Shoulders - Rounded Tops

EUR-USD 4 Hour Chart - Head and Shoulders formed with good examples of Rounded Tops. Ready to “Bounce or Break” off the “Neck Line”

Rounded Bottoms and Inverse Head and Shoulders

USD-CHF 4 Hour Chart Shows Rouneded Bottoms with Inverse Head and Shoulders

Rounded Top  - Inside Triangle Pattern

USD-JPY 4 Hour Chart shows Riunded Top Completed and then Breaking the Trend Line of a Triangle completes the Triangle’s Target in a prompt fashion.

Rounded Tops and Bottoms - In Summary

Can you see how these patterns repeat and show inside of other patterns?

Happy Pattern Hunting and feel free to email me when you see patterns at the “Right Edge” that get your attention - or need clarification.

Happy Trading in Good Health

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network.com (IEN), He is available as a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Charts Setting Up on Short Term

USD-JPY 30 Minute Chart - 1:20am EST

Inverse Head and Shoulder Setting Up

USD-CAD - 30 Min Chart 1:28 am EST

Triangle Pattern Setting Up

US is Light on Scheduled News This Week

Summarized Economic Calendar and Weekly Webinar

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Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Light Scheduled Economic News

Scheduled economic data is light for the US this week as Monday is Martin Luther King Day followed by the historic and long awaited inauguration of Barack Obama. Weekly Jobless Claims, Store Sales, and Housing data will likely be eclipsed as the world waits on the smooth transition of power from Bush to Obama – and signs of what the new commander in chief will say and do.   

Media Hails to the New Chief

The media has put a significant percentage of the US population literally in a state of mass psychosis (Obama Mania). This places the new President on an extremely high pedestal. I personally have warmed to Barack - a smart, charismatic speaker, and hope he succeeds in pulling the US and the world back to “normal” - but the harsh realities of the world will take 2009s challenges deep into 2010. Obama has his hands full - and possibly tied.

The Euro Breaking Resistance (click to Enlarge)

USD-CAD  2 Hour Chart Sunday Jan 19, 2009

Upward Trend Channel - Breaking Support (click to Enlarge)

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Jerry Furst is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

“We’ll Meet Again”

The much anticipated Historic G20 meeting in Washington this weekend leaves me wanting something more – and yet the status quo seems so comfortable. My hunch that this would be a meeting to have more meetings until Obama gets “steeped” into his new gig was spot on.

Spot and Stock Markets Will React on Monday

The markets may have wanted something more substantial that a agreement to meet on the 101^st day of the Obama administration – The communiqué states that the Group of XX “will meet again by April 30, 2009, to review the implementation of the principles and decisions agreed today.” Reminds me of the music from the final scene from Dr Strange Love as the bombs go off… “We’ll Meet Again… Don’t Know Where…”

Bush Says, “Goodbye”

Outgoing US President Bush hosted the world’s leaders at the White House on Friday and seemed to want to enjoy the photo op – but the body language of the other leaders seemed to be impatient. Market News International reports that the president’s last word at the microphone was “goodbye”.

The Official Declaration and Communique - Has the Last Word - In Error!

I found it interesting that at the bottom of the official communiqué was the message. [an error occurred while processing this directive] – (Click Above Image)

Click here for the entire Communiqué from the G20

http://www.g7.utoronto.ca/g20/2008-leaders-declaration-081115.html

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Search for a Bottom Continues

Back on September 28 I stated that,  “Chicken little was “buying Puts on SKY”" - I believe that the trade is probably profitable - As the search for a bottom continues…

With an unscheduled interest rate cut by the US - coordinated with the other Central Banks not helping calm or give confidence to the markets - Could ths be the capitulation - or just a stop along the way?

Tipping Point and the Chinese

Rick Santelli on CNBC is saying that we are at the “tipping point” and he was seen waving the white flag for the credit markets.  As Rick was speaking -  I was just reminded of the old “Tip Jar” joke sign that says “Tipping is Not a City in China”, and wonder what the Chinese are thinking - and doing…  Let alone the free worlds other friends that are flush with Dollars …

Earlier This Morning Developments from the UK

UK Bank Bailouts and Mergers are continuing and the UK Prime Minister Brown is calling on G7 and G20 nations to come together to strategize. I think they passed a $500 Billion Pound Sterling  bailout plan. 

Personal Note and No Webinar This Monday

The “1st on Forex” blog and weekly webinar will be on hold this coming Monday and I will return Due to my focus on trading, personal, and family issues I have not been able to keep this blog updated as often as I wish lately. But Stay Tuned… and Subscribe with the subscription box on the left panel here. 

I am travelling now to Orlando for a conference and will return next Tuesday - So in the mean time - trade safe.  I’m going to Disney World…!

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Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

EU Meets Over the Weekend

Pumping in liquidity and propping up businesses was front and center this weekend as a crisis in confidence is being headed off by a symphony of concerted action by central banks and governments and the EU nations trying to maintain composure on their alliance. 

The Financial Times is reporting that the EU Leaders are making statements vs proposing action to . “deal with the worst financial crisis since the 1930’s” ) click here for article

The Week Ahead

G7 Meets This Week, BOE releases Interest Rate Statement, FOMC Minutes will reveal what Bernanke and team were thinking at their last meeting.

Other Scheduled Events …

The Week Ahead Calendar and Webinar - Click Here

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Financial Markets in the Hands of Congress - Working Through the Night

 Tensions and Anxiety - Buying “Puts on SKY”

Talk of  “the end of ____________” run rampant - fill in the blank with whatever you want. Conspiracy Theorists are having the spotlight as Chicken Little is buying puts on sky! Either this will turn out to be the best bottom - capitulation in history  or it may be the end of history as we know it.  Sounds Dramatic - It Is.

More Bank Failures - Public Pissed - Professionals Pause 

As Washington Mutual crumbled into the arms of JP Morgan last week, Rumors are rampant that Wachovia Bank is on the edge. It’s amazing for me to talk to people from all walks of life and get their perspective on the current chapter of the financial crisis.

Three Perspectives

The general public:  is clueless, angry,  and scared -

The savvy and optimistic  financial investor:  believes that this is the best time to get in to the market and assures me that big money is sitting on the sidelines, starting to buy and waiting to buy more.

While others that have studied the deeper issues are looking at the current global picture and are telling me things that I prefer not to print.

Stay Tuned….

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Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Heeeees Baaaaack…..What’s that Sucking Sound?

I encourage people to forward the link to Ross Perot’s web site to all concerned - http://perotcharts.com/

From the newly launched Ross Perot Web Site: “The American people must wake up and face the reality that promises made in the past will soon bankrupt this nation. These problems are explained in an easy-to-understand chart presentation“.