Possible Dollar Reversal

by Mike Endres, Market Trend Trader | March 16, 2010

Just a heads up to the possibility of a short/intermediate change in the direction of the dollar.

Let's briefly look at two charts today - the dollar Bull ETF UUP and the dollar Bear ETF UDN. Please remember that UDN is a leveraged ETF and tends to move twice as fast as the actual dollar movement. You can see the that by comparing the relative movement of UUP/UDN over the same length of time.

First we'll look at the UUP weekly chart. The MRO (red line - Market Reversal Oscillator) has rolled under and with the action of the %R and 5DMA has given us an intermediate SELL signal. Just to be cool, I'd wait a few days or so to insure the move is of longer term.

UDN, the leveraged dollar Bear ETF is just as emphatic as its opposite number. The MRO has rolled over, the 5DMA is upward bound and the %R has started to rise.

These signals can, of course, be followed up by watching those things that tend to move when the dollar rises or falls - such as precious metals, the euro, other currencies and so on.

I really enjoy trading the UDN because the signals it provides are somewhat smoother that other currency ETFs and whipsaws are lacking. The X2 leverage is also a plus, just insuring my selling trigger-finger has no slack in it!

Over the past few weeks, the general markets have sulked in a corner sucking their respective thumbs, with no detectable trends; a little up today, a little down tomorrow. Perhaps this dollar signal (negative) will kick things into action this coming week.

Notes on the MRO: The MRO is a mathematical formula the generates both buy and sell signals for any tradable security, commodity or future returning a high, low and close at the end of the trading day. A rising MRO signals weakness. I falling MRO indicates strength. The reversal of the MRO along with the reversal of the simple 5 DMA of the tradable item and the %R (lower part of the the chart) signals a change in direction of whatever is being plotted. Generally when the MRO becomes locked below or passes through zero into negative territory, a bullish move is in progress. When the MRO is going up or locked in above zero, a bearish situation exists.

Contact Information

Mike Endres | Market Trend Trader | Tavares, Florida | Email