Beneath the Surface

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The CRB Index has been in decline since late August and in the process broke below the June low extending the yearly low. But for the past three weeks it has trended sideways consolidating that sell off.

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Beneath the surface we see that there is a very strong bullish divergence developing on the True Strength Indicator. Tuesday was day 35. A swing low formed on Wednesday with bullish follow through today. It looks as though the CRB is set to rally. Perhaps the CRB is sniffing out something happening with the dollar.

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The dollar had peaked on day 10 and declined until Wednesday where it printed a bullish reversal that broke the declining trend line. The dollar did print a higher high on Thursday and formed a swing low confirming a new daily cycle. Then the dollar reversed and closed lower for the day printing a red candle. Did the dollar run out of gas? I will point out that since the dollar printed it’s yearly low back in June, it has not rallied for more than four weeks before rolling over. And this is week 4 of the new intermediate cycle.

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As we discussed last night, gold gave us a head fake after rallying out of the day 20 pivot. Gold broke lower and now sits at day 27. After the big sell of on Wednesday, gold had a narrow range day that printed a lower low. That has eased the parameters for forming a swing low. A break above 1250.10 forms a swing low. With gold being so deep in the timing band, a swing low will likely mark the daily cycle low. A break of the declining trend line confirms a new daily cycle.

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