The Dollar will not die (yet)

This is how a typical Capitulation looks like! The rats are jumping ship and the Sentiment becomes lopsided.

Technically this looks like a great set up for a monster short squeeze. Maybe we will only get that , a squeeze, a good run to 81 or 88/9 before the end will come and we will enter the 60ties .....

I'm not religious about that, but what I do know is that given the structure in SILVER, OIL, GOLD that a minor US$ squeeze could trigger some serious correction.

We ran 2 different independent TimeCycles models ( which show that we dealing here with probabilities ONLY, just some indicator that is supposed to beat the rolling of a dice...) and both seem to hint at the possibility of a turning point coming.

The key message today is that all markets are completely aligned with the Dollar like Equities, Commodities etc. The degree of positive correlation is a systematic sign of the lack of REAL liquidity in the Market. When this Market dives there will be NO diversification, just a black hole. This is the biggest fear of the Centralbanks and this is the reason why they fight the tide. The only problem the have is that the more speculative the market became the stronger the tide turned they try to hold back.

It's a ponzi house of cards on steriods which will crumble by its own weight when the day arrives, which could be next week .....

The end of the Flame out

We aclled the SILVER Flame out here at reflections-of-reality and man what fire we got. Look at the spike in the Call Flows (bottom left) and this all against an unhealthy neg. Div. in the Put/Call ratios.

Silver has noe reached the an extreme Exhaustion level which we see just a few times in a decade!!! Normal exhaustions lead to tops or bottoms within 20-30 days and the counter already stands on 15. We are so overheated that we should expect extreme vola any day !!
Compare this to Gold and we have a similar story.
Our Timing model also seems to indicate a looming PIVOT.
Also look at the broader Commodities Universe and you will fine a high risk set up that COULD lead to a cyclical TOP across all risk classes !! (Notice that the counter has already reached a potential target !!)

We have too many traders and investors on the same side of the boat.

Nobody dares to question...

1. the Inflation story
2. GOLD and OIL and SILVER going to the moon
3. the end of the DOLLAR.

Maybe we will get there but the curent structure of the Markets indicates that we might go the other way for one more round before these 'common truth' materialze.

Large Cap Breadth continues to deteriorate: Topping Pattern

Sentiment looks mature

Sentiment at a crossroads

We are back at the key resistance level. If the Indicator can break free (up) from here then we should expect a sunny summer. If not then we are approaching the end of the party.

The ultimate INDICATOR: THE DOLLAR

The Dollar will show us the way. A bounce seems imminent which will kill all ASSETS runs from Silver,GOLD, OIL to Equities and Credit (BONDS).

The all encompassing question is not whether the Dollar will bounce but if the bounce will be of cyclical nature or in other words if the authorities can avoid this. The end of QE2 could be the catalyst for the event chain......let's see whether we have another sell in may and go away year in 2011....

On the other side, it the FED can uphold the downward momentum in the Dollar then we could see some price explosions to the upside (SILVER, GOLD, OIL !!)

When the DOllAR rises it will lead to corrections of different degrees in various asset classes.

medium to high DEGREE

SILVER and Gold

medium to high DEGREE

EQUITIES

low to medium DEGREE

COMMODITIES

Equities will follow OIL down.....

Unless we get a quick QE3 announcement, the SPYDER and the Q's are in position to correct. The Correction could be of cyclical nature (but does not have to be):

MOMO and Flows are negative, plain and simple.
...but whether the correction starts now or whether we will see another re-test of the high (see cycles chart in top right) is unclear.
Option pictures are muddy right after the OPEX, given the amount of active market making we have experinced in the last week.

OIL is getting ready for a correction.

All seems in place to OIL to top out.

Silver and Gold are the last Knights riding....

Gold looks ready for the final Spike...

...as does SILVER
Some Playas have already started to take money off the table (see Flow Momo).
Timing, MOMO seem aligning .....
...but be careful, because the high Flows in Putoptions could ignite another shortsqueeze before it's over.

Nice blow job into the OPEX...

When you look at our VIX indicators you can observe how the PLAYAS have moved the Market up into OPTION EXPIRATION. Someone must have made a fortune by buying cheap calls earlier this week before shooting them into the money.....

There is nothing like efficient markets !

Thanks god that GS is warning us of a GDP cooldown which could affect the Markets next week.

The longer term Equity option charts don't tell a clear story...

OptionFlows show caution...

Seriously lower Flows in Call Options (bottom left corner) and diverging Put/Call ratios paired with steep Option profiles (bottom right corner , green line) indicate upcoming Volatility.

Maybe the market hold another week, maybe not....

FLOW and MONO unpdate

The medium is at risk and so is the short term. Look at the bearish Money Flows of the Institutional Portfolio (!!).

DOLLAR or SILVER are differnt coin of the same story. Silver could falter in the not too far out future.

And don't forget OIL which is also linked to the Dollar story.

TimeCycles: StormWarning

The Spyder could run for another week...

Silver may join.....
...as could the DOLLAR fall for another week.
.....but bear in mind that our TimeCycles vary also by a week, which could mean that we are bout to enter some interesting Phase.

How long can the MANIC phase in Gold run ??

Look at (A) in the Daily Exh. Summ Chart. If the neg Divergence takes hold then Gold could see some more serious correction. The Mania Phase looks mature, but that only means that we could see explosions in both directions.

IF NOT...then the Mania can go hyperpolic.

It all brings us back to the USD !!

A medium term perspective from the Exhaustion Summation Index

Exhaustion Summation Index is special kind of MOMO Exhaustion Indicator which wllows us to bring a medium term perspective to the degree of EXUBERANCE or PANIC we have in a Market at a certain point in time.

We ususally look at the Weekly and the Daily index to determine where we deal with medium term or shorter term Exhaustion situations. A good Cyclical Pivot shows up in both Indicators simultaniously either by Divergence or by sporting an Extreme

(Values >>1 : Exuberance, Values <<0 : PANIC).

DOLLAR:

The key timesseries to look at this juncture is the USD (index: DXY). The Euro is flying, Silver ,Gold, Oil and commodities are 'our last hope' and all is 100% negatively correlated to the USD.

The Exh Summ. Index is painting another picture, namely one of a downside exhausting DXY that could be in for some serious (10+ big figures) rally. The positive Div. on the weekly is one of the most pronounced in 30yrs (!!). If the weekly does NOT break the divergence (see green DIV line in the top chart) then buckle up, because we will experience a completely unexpected short covering rally of biblical proportions.

SPYDER:

SILVER:

Silver seems flaming out. 40-45 is the target zone and it can turn here any second....
COMMODITIES:

Commodities in general show a more ambivalent picture where differnt cases seem possible
BOTTOM LINE:

WATCH the DOLLAR

Breadth looks tired

Sentiment further deteriorates

Our VIX_OSC look bearish..

as does his brother the VIX_OSC II....
...the ISE data doesn't really change the view....
...as does the CBOE data.

Warning Signs

Next week could be interesting against the backdrop that Dr. Copper is saying GOOD-BYE to the rally and the the fact that some PLAYAS have been started to take profits...

Breadth is flattening out

Breadth is still demanding a cautious (high cash %) stance.