The Dollar Index compares the value of the U.S. Dollar with a “basket” of foreign currencies.  In overseas trading early on October 20, 2009, the Dollar Index made a new Low.  Assuming that one desires the value of the U.S. Dollar to rise in relation to other currencies, the new Low in the Index can be counted as “good news.”

Why is that so?  This is one of those instances where “it’s so bad, it’s good.”  My reasoning is based on the clues which are being given off by our “Candelaabra” Indicators, which focus on the waves of the Indicators in relation to each other.

Please note the following conditions on the attached Daily chart of the Dollar Index:

There is a Paunch between ADX and Stoch K.

Bollinger Percent B is reasonably low.

There is a Paunch between Chandelle 1 and Chandelle 2.  Chandelle 2 is very low.

By themselves, these conditions are not especially compelling.  However, they pretty much repeat themselves on the Weekly chart and also on the Monthly chart, which tells us that the conditions are not anomalies and that an upward reversal may be forming.

There is a slight bullish movement in the Index at this moment.  While it is early, we are calling the probability of a turn in the U.S. Dollar occurring right now.  The pieces are in place.  My suspicion is that the price action which we see so far today is the beginning of a major bull rally, which should take the U.S. Dollar up to at least 85 or 86.

William Kurtz

October 19, 2009

CandleWave, LLC

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