A bearish Head & Shoulder reversal pattern ended the uptrend (1999 to mid 2002) for the US Dollar, since then the greenback went free falling. Early2005, the US Dollar regained composure as it formed a double bottom pattern, it convincingly took out 2004 trough and broke-out from its double bottom pattern thus reversed the 3 years downtrend. However, it encountered strong resistance at 2004 peak, after several tries the bulls couldn't muster enough strength to take-out this resistance; as a result, the bulls conceded to the bears and the US Dollar resumed its downtrend.
The past weeks, stability returned to the US Dollar and currently moving sideways inside a symmetrical triangle pattern, is the greenback close to bottom or could there be another counter trend wave similar to the 2005 cycle brewing up?
CRB Index
The weakness in US Dollar drove the commodity markets to new highs (highest in a decade) as investors rushed to commodities to hedge against the falling dollar. There was deep correction in the middle of 2006 to early part of 2007 as gold (the precious metal) loses some of its appeal and light crude oil retreated, but the commodity market bounced back with a vengeance and easily took-out 2006 peak and went on to register new high first quarter of this year.
Last February, there was broad sell-off in the commodities as investors shifted funds from commodity to equity (probably anticipating short term bottom in the equity market); however, the past weeks commodities rallied back, is the commodity market poise to make new high or is it over stretch?
10Years USD Treasury Bonds
Keeping track with the US Dollar movements, yields in 10years T-Bonds dived to its lowest level last 2003 after it broke down from its' bearish double top pattern; however, yields immediately spiked up after touching historic low and re-tested downward resistance line (after several tries it successfully broke above its downward resistance line last middle of 2004). Yields were steadily climbing for three years before it broke down again from another double top pattern last 2007 and resumed its downtrend.
Zooming in the chart, you will notice a bullish divergence developing, will the yields in Government Bonds re-test historic (2003) low and spiked up again or will it wash out its' historic low?
S&P500 Index
The steady climb in T-Bonds Yields from 2003 to 2007 ignited the bull market run in US Equity Markets, S&P500 Index rose to record levels latter part of 2007. However, we saw this uptrend broken early this year when the index broke down from its' bearish reversal head & shoulder pattern. After retracing 38.2% (measured from 2002 bottom to its recent peak), the market bounced back and currently hovering near its' major trend line support turned resistance.
The past month, investors shifted funds from commodity market to US Equities (anticipating potential bottom in US Equity Markets), will S&P500 Index broke above its major trend line support (turned resistance) and resume its bull run soon?
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