As this chart shows, USD has no further to drop before it makes a lower low to September. What that also means is that there is a risk of reversal to the upside. It is a double edged sword because if it breaks down, there would likely be a boost to commodities, emerging markets and precious metals (ref. HUI 150 target). But if it reverses here, these things become vulnerable.
I had expected a reaction in the gold stocks but as of this moment that reaction was just a one day wonder, painting a bearish engulfing candle on HUI that has so far failed to bring any additional downside follow through. But again, the USD has not quite broken down so it would pay to let this play out rather than jump the gun.
I decided not to take a profit on the DUST (hedge) positions and instead took a loss this morning. Along with that however, I skimmed more profit on miners (adding a BTG sale to the NGD sale). Depending on USD, I’ll plan to adjust accordingly (either short-term bearish or bullish the gold miners/gold/silver) with the idea of an eventual HUI 150 target still open. The current items held are AAU, KGI.TO/KGILF, LSG and PG.TO/PIRGF, each of which either has a bullish chart or a not over bought chart.
As for crude oil, it has pulled back and again, if USD is to fail and commodities resume bouncing, a buy at or above support (14.20) could work well for an extended trade. Also, XLE, which has been pulling back a bit could be considered. I prefer crude because the components of XLE could get hit in tax loss selling season, among other issues that the commodity itself does not have to factor. It is about supply/demand, sentiment and US dollars. XLE by the way, has a gap below 64 (current price at 67.50).
Finally, what would be good for crude oil would probably be good for emerging markets; i.e. a weakening USD. I still hold the EM’s short but as noted in the weekend report it is on a short leash.
USD is right at a do or die point. If it reverses upward there could be pressure on most things that have been bouncing during its down leg. If it fails the September low it could be time for an extended trade in commodities and a continuation in precious metals (which could by the way, bring gold as high as its bull market/bear market decision points in the 1220-1240 area).