Dollar Carnage

I published this chart last year for the first time trying to illustrate the ominous straits the dollar had steered into. The carnage in the dollar is but the latest in a hundred year legacy of the Fed and our current debt based system. The dollar chart is forming a classic triple top reversal formation that renders a projection of 61.50 on the US dollar index. The projection is calculated by measuring the height of the formation from its lowest point to peak, then subtracting this amount from the base level of the formation. The formation is only valid when support at the baseline fails, in this case 74. The dollar has fallen to 73.77 as I type this. We may be witnessing the the collapse of the US Dollar that must occur. The implications for gold and silver are obvious, especially gold.

Here is what John Murphy of Stockcharts.com says about triple top patterns:

Triple Top Reversal

The Triple Top Reversal is a bearish reversal pattern typically found on bar charts, line charts and candlestick charts. There are three equal highs followed by a break below support. As major reversal patterns, these patterns usually form over a 3 to 6 month period. Note that a Triple Top Reversal on a bar or line chart is completely different from Triple Top Breakout on a P&F chart. . Namely, Triple Top Breakouts on P&F charts are bullish patterns// that mark an upside resistance breakout. We will first examine the individual parts of the pattern and then look at an example.

Champion Enterprises Inc. (CHB) Triple Top Reversal example chart from StockCharts.com

  1. Prior Trend: With any reversal pattern, there should be an existing trend to reverse. In the case of the Triple Top Reversal, an uptrend should precede the formation.
  2. Three Highs: All three highs should be reasonable equal, well spaced and mark clear turning points to establish resistance. The highs do not have to be exactly equal, but should be reasonably equivalent to each other.
  3. Volume: As the Triple Top Reversal develops, overall volume levels usually decline. Volume sometimes increases near the highs. After the third high, an expansion of volume on the subsequent decline and at the support break greatly reinforces the soundness of the pattern.
  4. Support Break: As with many other reversal patterns, the Triple Top Reversal is not complete until a support break. The lowest point of the formation, which would be the lowest of the intermittent lows, marks this key support level.
  5. Support Turns Resistance: Broken support becomes potential resistance, and there is sometimes a test of this newfound resistance level with a subsequent reaction rally.
  6. Price Target: The distance from the support break to highs can be measured and subtracted from the support break for a price target. The longer the pattern develops, the more significant is the ultimate break. Triple Top Reversals that are 6 or more months old represent major tops and a price target is less likely to be effective.


Advertisements
This entry was posted in Technical Analysis, USD. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s