Another Head and Shoulders Lesson

As we stated on the head and shoulders for the S&P, the dollar rules everything right now. Until the dollar is devalued, the power that be (PTB) know that there will be no "recovery." (It's not really going to be a recovery, but we'll get into that another time.)

A few weeks ago, we were looking at the US dollar, shown in a daily chart below, for signs of an inverse head and shoulders. This works like the standard head and shoulders, but it goes the other direction--it shows a bottom and a rally.



We are very suspicious that the dollar will rally much from here. As you can see, there was an attempt at an inverse head and shoulders but the dollar could not rally to meet the neckline, which would have activated the pattern and taken it to 83 (measured by the US dollar index.)

The dollar not only did NOT activate the pattern, which could be interpreted as a vote of "no confidence," but it also entered a down trend channel. Today, we seem to be hitting the upper limit of that trend, so in line with the S&P forecast, we don't believe that the market is going to roll over quite yet. We anticipate the dollar moving lower as the S&P rallies one more time over the next week or two. Then folks, we'll just have to see what happens at that point.

Volume is light across the board. If the PTB wanted to support the markets, this is the time to do it. When the summer season is over and there are more market participants, we expect things will change quite dramatically to the down side.