The US Dollar Index appears to be out of control with wild speculation, and this is exemplified by the trendlines on the Daily chart. This pattern is known as either "Expanding" or "Inverted" Triangles, and as a "Broadening Top" pattern. I will refer to it as an Expanding Triangle. What it has is diverging trendlines rather than converging trendlines that would be seen in a typical "Symmetrical" Triangle pattern. The expanding triangle resembles a "Megaphone" on the chart.
What this pattern on the Daily chart in the Dollar Index is similar to is the "Head and Shoulders" Bearish Reversal or topping pattern. How so? They are both "five point" reversal patterns, but in the case of the expanding triangle, there is a raised "right shoulder" and the "neckline" is downward sloping.
I find this can be a pattern of "Accumulation" or "Distribution", there is no way to know beforehand, although there are reasons to be biased or lean one way or the other when the Index approaches "Key Reference Areas", and at that point the price action using Japanese Candlestick Analysis, Volume, Open Interest, and the COT reports can be looked at closely in order to look for an even greater edge in terms of probabilities and risk management when making a move. Knowing where a trade idea is wrong is the single most important consideration before making an entry.
In the meantime, historically speaking the expanding triangle has bearish implications, and I have read that many stocks in 1929 had similar patterns. The perception in this type of pattern is a market entering a dangerous phase.
What impact or ramificatons will the Dollar Index have on Commodities, Treasury's, Currencies, and Equites, are "to be determined", but I wouldn't ignore the signals that are coming from the Dollar Index futures Daily chart going forward.
Back in early 2012 I found the Gold Miners (GDX) resembled this type of pattern, and it has not been a pretty sight for them since.
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-- Posted Monday, 8 July 2013 | Digg This Article | Source: GoldSeek.com
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