USD

I got to add my conspiracy theory to the mix here! Otherwise life is not much fun.

The "surprise " strength in USD is going to bring the house of commodities tumbling down.

Sorry gold bugs, the time is not ripe as yet.

That in turn is going to bring the equities down.

That means we will have the plunge everyone and their granny is talking about.
And we shall live happily ever after that.

At that point, who would have thunk (well well well..) that the Buck will turn out to be Achilles Heal for the Bulls.

Dollar bottoms up

With all the doom and gloom about the "fiat" currency, US Dollar, it is hard not to get on the trash train and call out for an "alternate global currency". Well, now I know what "they" are smoking or they will need to when they awake from their self inflicted bold illusion.

Lets see the daily chart for US Dollar Index futures. It is obviously bearish for now but I am counting on to a bounce at $75.943 or so. Whether that bounce is just "another" upward correction or the reversal is yet to be seen. But I will dare to be bullish at that level until the market smacks me.

Why? I can count a 5 wave decline that is ending at $75.943 - $75.602. The lower target is achieved by counting by measuring from the real body of the candle. I am assuming here that wave (v) will be equal to wave (i). It the guideline of equality since wave (iii) is longer. Although wave (iii) is not shorter than 1.618 of wave (i). But still the structure looks fine.

Also, notice the jump in volume. Are the minority bulls finally throwing in the towel or it is accumulation? Jump in volume at price extreme is often a sign of price reversal.

BTW, where are the all the Fundamental Analysis folks that proclaimed that since US led the world to recession, US will lead it out! So why USD is so weak. Oh, the printing press theory. Well, it is happening all over the world, especially Europe. Why is cable so strong now?

That is why it pays not to put too much stock (sic) in the popular theories of cause and effect propagated by the Financial gurus.

75.943 is my level and I can count to 5!

Put Call Ratio

Equity Put Call Ratio (SMA) and Total P/C volume: CBOE data

This is CBOE Equity Put Call Ratio (PCR) and the total number of Calls and Puts. The PCR is smoothed by 10 & 20 period(day) Simple Moving Average (SMA). Going into the dip of Oct 2008, the volume of calls dropped while puts were "put on". The 10 SMA of PCR jumped.

The call activity increased in Jan 09 and again swooned in the middle of March.

Things have been going on pretty sideways for last few weeks. The PCR is at the lowest point of the data set. Meaning overall there is hardly any fear.

PCR is best used as a contrarian sentiment indicator but mostly gives the rear view.

Lets dig deeper into the latest time frame in the next chart.

Here we have 10/20 SMA of PCR along with S&P 500 closing price divided by 100 (SPX/100) on the right scale.

In the last three trading sessions the CBOE Equity data is as follows:

date--- Call volume--- Put Volume--- PCR

8/28--- 1794424--- 1007562--- 0.56

8/31--- 1280282---- 807063--- 0.63

9/1---- 1822353--- 1247665--- 0.68

Notice the jump in volume on 9-1-09. Also note that the PCR has not moved much even after a sell off on apparently good news.

Investors are not running for the exits and buying a whole lot more puts. Although VIX jumped since yesterday.

Does it mean that the investors are not taking this sell-off seriously?

That is what the PCR is telling today.

Lets keep an eye on Put volume in the next few sessions.