This will be a quick post that looks at the momentum situation of both the gold futures (/GC) and the US Dollar Index (/DX). We will note that gold is standing on a very tall ladder and that it will be nearly impossible for the precious metal to advance many rungs higher without some consequences. Meanwhile, the dollar rally is really running out of steam. Will this be the pause that refreshes the dollar to begin a new leg higher? Or will the dollar continue trying to walk through the quick sand?
Oh, before I forget. I have made an interesting breakthrough using the True Strength Index (TSI) indicator and both charts today will show you what it does. The breakthrough is subtle but none the less helpful.
For some time I have studied the behavior of the TSI at the turning points of its direction from up to down and from down to up. The short story is that very frequently the slope of the TSI changes on the very bar before it changes direction. That is, the mathematical slope consideration shows that slope decelerates just before the top, and accelerates just before bottoming.
Anyway, you can see how effective/ineffective this technique is. When the TSI is rising and the slope begins to decelerate I color the TSI red. And, when the TSI slope is accelerating at low turning points I color the TSI green.
Colors are otherwise used to define the four possible TSI conditions: rising above ZERO (blue), falling above ZERO (cyan), falling below ZERO (magenta) and rising below ZERO (blue).
Here is gold on a daily chart as it looked around noon today.
|Click on any chart to ENLARGE|
Futures are now trading and the candle not shown in this chart is for tomorrow March 19. Gold is just barely positive from today's close hours ago. But, the TSI has turned color to .... you guessed it, RED.
Here is a chart of the US Dollar Index (/DX) as it appeared around noon today.
It is quite common for the TSI to rise above ZERO on a strong rally, then price will either hold sideways for a few days or even give up some of the gain, and the TSI will find itself right about at ZERO. When this happens it means that traders have, for the time being, neutralized the momentum in either direction. If the bulls were just playing possum, letting the price come back to them a bit, they will hit it hard and get the rally going even higher. The TSI often bounces around the ZERO reading.
Gotta go to an evening soccer game. Keep an eye on things for me, OK?