Best Financial Markets Analysis Article It's Monday, and there is no better place to start the week with the only asset that has mattered for the past 8 months - the Dollar. Although Friday's job report brought a spike in the Dollar Index, the down trend remains intact. However, the likelihood of the downtrend ending leading to a counter trend rally or consolidation is now as high as it has been in months.

Figure 1 is a weekly chart of the Dollar Index. This is the same chart I have been showing since June, 2009 - prior to the Dollar Index unraveling. Positive divergence bars are marked with pink markers inside the gray ovals. A weekly close over 75.94, which is the high of the most recent positive divergence bar, would suggest that the downtrend in the Dollar Index is ending.

Figure 1. Dollar Index/ weekly

Figure 2 is a weekly chart of the PowerShares DB US Dollar Bear (symbol: UDN). This is the inverse of the Dollar Index. The indicator in the bottom panel searches for negative divergence bars, and we have had a cluster of these over the past 13 weeks. As discussed recently, this can be an ominous topping pattern or a spring board to higher prices - i.e., a blow off market top where prices really accelerate higher. A weekly close greater than 28.70 would suggest higher prices for UDN, which means a much lower Dollar Index. A weekly close below 28.25 and the down trend in the Dollar is over for now.

Figure 2. UDN/ weekly

My take is this: in all likelihood, this is the end of the down trend for the Dollar Index.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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