US$ index, still no top but...

Nearer term $ index outlook :

In the Jan 20th email, again said there was no confirmation of even a shorter term top "pattern-wise". The market did indeed continue higher, currently consolidating from the Jan 23rd high at 95.50 (and a level not seen since Sept 2003). At this point the upside pattern from at least the Jan 15th low at 91.50 is still not "complete" (currently within wave 4), and along with positive technicals (see buy mode on the daily macd at bottom of chart below), continues to argue further upside (within wave 5). However, with the market overbought after the rally from the Dec 16th low at 87.60 (and the even larger surge from the May low at 78.90) and nearing long term resistance at 95.75/25 (see long term below), would not be surprised to start seeing better offers at higher levels, and as the larger upside momentum starts to slow. Nearby support is seen at 93.65/75 and the base of the bull channel from Dec (currently at 92.75/85). Bottom line : still no confirmation of even a shorter term top, but may start to see better offers on further highs.

Strategy/position:

Still long from the Jan 6th buy at 91.35, and for now would continue to stop on a close 15 ticks below that bullish trendline from Dec. Note too that further upside may start to stall and become more of a period of ranging with an upward bias ahead (versus a sharp, one way move), so will want to get even more aggressive with those stops on new highs.

Long term outlook:

As discussed above, there is still no confirmation of even a shorter term top but the market is longer term overbought after the huge surge from the May 8th low at 78.90. Additionally, sentiment is widely bullish (contrary indicator) and the market is nearing very long term resistance in the 95.75/25 area (50% from the July 2001 high at 121.00 and a retracement that tends to work well in this market). However as been discussing, these factors do not confirm a top, but just is a rising risk to the longer term upside (and something to be aware of). Note too, suspect that a more important top (for at least a few months) will take some time to form, with slowing upside momentum an early warning sign (which has not yet started to occur but may ahead). Longer term support is now in that whole 92.50/93.50 area (broken Nov 2005 high and broken ceiling of the bull channel since March 2008). Bottom line : still no confirmation of even a shorter term top (never mind a more substantial one) but negatives are increasing the risk in the bigger picture upside form here.

Strategy/position:

With no confirmation of a top, would stay with the longer term bullish bias that was put in place on Jan 6th at 91.35.

Current:

• Near term : long Jan 6th at 91.35, still no confirmation of even a short term top.
• Last : short Dec 9th at 88.75, stopped Dec 17th above t-line form Dec 8th (88.35, closed 89.15).
• Longer term : bull bias Jan 6th at 91.35, magnitude of further big picture upside from here a question.
• Last: : bear bias Dec 9th at 88.75 to neutral Nov 23rd at 90.05.