The answer could be in the crude oil market…

Correlations and psychological numbers…here they are:

I’m looking at the current bounce that crude get when it has been piercing 68.00.    There is support at 67.69 and 67.77 as those two levels were where crude bounced from last.

The U.S. Dollar Index has continues to rally from the drop of the last two sessions.  The dollar is back above 84.00.  

If the crude oil market continues to rally to and through 69.00, the dollar’s 84 level is toast.  The “safe haven” rally that the dollar has been enjoying is likely to still be the case…unless the EUR/USD can find its way above 1.3400.  It won’t be a magical or sudden shift in stance but the sustained strength of the Euro will eventually whittle away at greenback strength.

This is the second significant correction in the dollar since the Summer breakout.

 - Raghee

I’m looking at this level regardless of what happens next week.  The “000″ psychological level is a near term ceiling.  The high was 1.3007.  The short term charts — for me, the 30 and 60 minute charts — are heading higher in a mark up cycle.  I have been swing trading these time frames, but my willingness to buy as prices near the 3000 ceiling is diminishing…

Ok, so where does a potential ECB rate cut factor in?  Well, all fundamentals must be confirmed by price action and the discounting of this should create a near term ceiling…and I’m looking to the triple zero level.  So what if that level is broken to the upside?  I will focus on 1.3100 and 1.3181.

 - Raghee

You can watch the other two Lazy Days Lines videos here. 

- Raghee

I’m not looking to call a top…BUT the 30 minute chart of the USD/CAD is setting up a potential breakdown.  The market cycle has transitioned to a sideways Wave and with the MACD Histogram firmly negative, the pre-confirmation is to the downside.

Crude oil will likely hold the fate of the follow through.  Today’s pause in the relentless uptrend is tempered only by the bit of strength in today’s crude oil trading; currently crude is at 68.05.

If the climb can take us higher towards 70, there’s a good chance that the consolidation here in the Canada will turn into a break lower on this short term 30 mnute chart.

Just remember that the only reason I am looing short is because of the negative MACD-H that is accompanying the sideways price action.  If the MACD-H goes positive then it’s a pre-confirmed buy waiting for the trigger.

The trigger is if price can break first, the 55EMA and then the green horizontal support line I have drawn.

 - Raghee

The new, low crude oil levels seem to be flying under the radar amidst the problems on Wall Street and the congressional hearings.

It certainly isn’t hurting the U.S. Dollar…

This dollar strength is killing the fiber…

and as much as I wanted to step in and catch a falling knife on the weekly chart…

It just wasn’t meant to be.  

I was really hoping to see a break to the upside when the market cycle went sideways on the 240 minute chart.  I got whipsawed for a quick stop out o the 30th of October and didn’t get another set up as the fiber just didn’t give me the signal to act.

 - Raghee

The short term 60 minute set up outlined in the last post has triggered and although it tested my patience, ended with a nice outcome.  Next.

The 240 minute time frame is consolidating and the set up is a triangle in an distribution cycle.

The MACD Histogram has just gone positive but is far from solidly confirmed above the zero line.

If prices head lower it would be very easy for the MACD to negative at this point.

As long as the market cycle is sideways, look to play the breakout to either side.

 - Raghee

The cable has pulled back to Wave support on the 60 minute chart.  Add that to the current mark up trend cycle on that time frame and you have a swing buy set up off the 1.7457 level.

This buy trigger is occuring within an overall (daily) bear market so in essence this is a short term time frame play on a bounce.

The daily chart correction could certainly add up to what I call a “one thing leads to another” set up where the 60 minute buy is exactly what would be needed to play a daily short off resistance (trend follow).

I will upload some video pertaining to this set up later today.

 - Raghee

The USD/CAD has been running higher like it has booster rockets at its side.  At these heights all I can do is wait for a pullback to engage the uptrend and seize the opportunity to buy strength.

The opportunity is setting up as a momentum trade on the 60 minute chart.  Now this sideways action by no means guarantees a break downward, but I’m taking my cue from the negative MACD Histogram and am playing an aggressive short from the 1585 level and would love to see a second breakdown as prices trade lower through 1495 thus breaking the “00″ psychological level.

All this would lead to the swing trade buy I really want on the 240…

A pullback to the top line of my Wave — just as long as it is still in a 12 to2 o’clock angle – will trigger a buy.

 - Raghee

I have to admit that I have literally and figuratively “gone fishing” in terms of engaging these crazy markets this week…so much so that I have fled to Dallas for a mini-vacation to keep from getting involved in the market’s flurry…and fury.

I do have 52 week high/low alerts and many have gone off this week (EUR/USD, EUR/JPY. AUD/USD, Nasdaq Comp., NYSE Comp…) but it’s the U.S. Dollar that I am watching as it pierces the big psychological 80.00 decade level.

I will be watching the 80.00 level closely (on the daily chart) for a re-test.  Breaking up through 80.00 shows that the ceiling can be broken, but that is NOT the same thing as this ceiling becoming a floor.  Price action must establish that.

Realize that it is not inherent strength in the greenback…rather it is comparatively strong when looking at the Euro and that has the EUR/USD tanking (current support is at 3800) pushing the Dollar Index higher.  

October, November, and December Fed Funds futures have a 25 basis point cut fully discounted and a 50 basis point cut as a possibility.  This would be dollar bearish, but greenback bulls don’t care.

The 700b rescue plan is really going to be a 1.5t (trillion) dollar plan before we know…history tells us these initial estimates represent half of what is typically going to be spent.  The Fed will lower rates to 1.75 or 1.50%.  If crude oil bounces at the 90.51 low, head’s up!  But let’s not forget the other side of the dollar argument…Is the decoupling theory unraveling?  Is that the fuel for the USD rally?   Read this artcile from Reuters.

Are dollar buyers bullish because the are long…or long because they are bullish?  I am thinking that there are an incredible number of stops sitting between 80.00 and 80.80.  And we all know the market moves in the direction of the greatest number of stops…

I’d love to hear what you think…

 - Raghee