Weekend Update #2

DOLLAR INDEX The dollar took a few days to retrace some of its gains, but finished strong on Friday with an bullish engulfment candle.

As stated last week, it appears that this witch has put in an important bottom. The ultimate objective will be to take out the 11/19/08 H of 91.212.

It's not going to happen overnight folks. It will take time and there is a lot of overhead resistance that she will need to overcome.

Notice how price broke the channel and came back and backtested it.

Here is what the intraday looks like. It appears that minute [i] and [ii] have completed. If that is indeed the case, then [iii] should be in full force next week.

The first objective would be the high of [i] at 79.515. [iii] = [i] at 80.30 and the 161.8% projection of [i] is at 81.533. The 78.305 L should not be breached.

The worst case scenario is that this is a zigzag corrective and we only get 5 more waves up. Remember, 5 waves can not be a full corrective.

If my interpretation of structure is correct, short bets against the dollar or long bets via crosses, may prove painful.

GOLD The yellow metal appears to be close, if not already, to completing a minuette (ii) leg.

If this is the case, gold has set itself up in a [i] [ii] , (i) (ii) situation. This is where you make your money - the sweet spot of a (iii) of [iii].

Price action needs to confirm by definitively breaking the channel (notice how it has supported it) and the 942.10 L. The next objective would be to take the 930 L.

(iii) = (i) at 930.90, while [iii] = [i] at 887. (A)(B) = (C)(D) way down there at 641.30. I don't know that price gets that far, but I also don't know that it doesn't.

I will be looking to short this market via puts early next week with a channel break. Where do I know that I'm wrong? If price takes the wave [ii] high at 974.30. My stop will be a breach of that level.

I have mentioned this previously, and I'll mention again - it sure has the look and feel of a triangle. Not to mention, an inverse H/S on a bigger picture. Lets see what price action brings next week.

Please do your own due diligence before placing any wagers.

30 YR BONDS The bond complex had a nice week to the upside.

When drilling down to a smaller time frame, it is clear to me that there is a 5 wave structure down off the 121'11.5 H. It's also clear that we had a 3 up from the 114'30 L. And equally clear we had 3 down from the 119'8.5 H.

What does this mean? An expanded flat for minor 2. Expanded, because [b] went beyond the the price extreme of [a].

Based on the subwaves, it looks like price should move a little higher early next week to complete the minute [c] leg, however, it should not exceed the 121'11.5 H. At that point, price action should resume to the downside.

I talked about the possibility of a triangle tracing last week. This is still on the table.