New 2009 Lows for Dollar and Highs for Crude Oil

Jun 1, 2009: 6:47 PM CST

The intermarket relationships are reasserting themselves as expected, as we’re seeing weakness in the US Dollar Index and strength in Commodities – we recorded fresh 2009 lows for the US Dollar Index and fresh highs for Crude Oil, the S&P 500,  and mere points away for 10-Year Treasury Yields and Gold.

Let’s focus on the Dollar vs Crude Oil:

As I’ve mentioned various times, the Dollar Index was completing a Bear Flag, and now we’ve exceeded the downside targets projected from that flag – that’s not good for the Dollar Index – it shows stronger than expected weakness.

The only ‘support’ in sight is that from the $78 level which is minimal at best from the December 2008 lows – breaking that level would take us to lows not seen since September 2008.

A falling dollar is inflationary, and in an environment where ‘deflation’ is the concern, that’s proving to be bullish short-term for the US Stock Market (which also made a fresh 2009 high today).

Let’s now take a look at Crude Oil’s new high on its daily structure chart:

Crude Oil Daily:

Just as the US Dollar Index completed a Bear Flag, Crude Oil has completed and exceeded the targets of a Bull Flag that formed off the February Lows.

We also got a “rounded reversal” and multi-momentum divergence that preceded this stellar rally upwards, in which Crude Oil prices have almost doubled in price.

I have to admit, even being bullish Crude Oil, the relentless buying pressure of the last three trading sessions surprised even me -we’re likely in the middle of some sort of 3rd wave fractal move up in Crude (and down in the Dollar).

That’s not to say these trends will continue forever – keep watching the Dollar along with the other key markets very closely as we continue to get new information each day.

Corey Rosenbloom, CMT
Afraid to Trade.com

Subscribe for the RSS Feed here.

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

11 Comments

11 Responses to “New 2009 Lows for Dollar and Highs for Crude Oil”

  1. johnnywalker Says:

    That looks like a zig zag upwards in oil ?

  2. Don-Da-Mon Says:

    Corey, I've been normalizing the OIL and SP to the UDN Dollar Bearish ETF. That way the true value of the commodity/market can be seen. Oil value has been relatively flat the last 100 days. Using the attached link and select the UDN tab to see true value change on USO or SPX. I've done it with GLD and SLV to see how they've performed. I wish I could get other indicators on this Perf Chart. Do you know of a way to normalize and add indicators?

    http://stockcharts.com/charts/performance/perf….

  3. sahil kapoor Says:

    crude oil top is very near. I think its going to top out between $72- $76

    http://sahilkaps.blogspot.com/search/label/Meta

  4. Corey Rosenbloom, CMT Says:

    Absolutely – could also be referred to as an “AB=CD” Measured Move as well.

    Definitely exceeding price targets – confluence resistance comes in around $70 so we'll see.

  5. Corey Rosenbloom, CMT Says:

    Nice comparison there.

    One way to 'zero-out' a fund or market is to click the title or the small colored square in the title – just above the chart but beneath the large title.

    That will show how other markets compare to that market specifically.

  6. Tan Haw Swee Says:

    Hi Corey, it is exciting to read about your analysis about the crude oil in relation to the USD. I am in the trading with the forex for the USD/jPY pair, but the USD in that particular pair seem going undulating but rather strong, just like the USD is trying hard to break up. By the way you have not talked about copper for quite a while now , can please give a little comment on copper as there is an up swing recently. plesae tell us how far can the copper goes up. Thank you.

  7. C.C. Rider Says:

    I noticed the weekly on the dollar entering a strong trend as well. Good stuff Corey.

    http://stockcharts.com/h-sc/ui?s=$USD&p=W&yr=1&

  8. Video: How Low Can the Dollar Fall? | Afraid to Trade.com Blog Says:

    […] Sometimes I’m convinced Adam reads my blog, or at least we’re on very similar wavelengths in our analysis!  Just last night, I posted my own take on these two markets in my comparison post “New 2009 Highs for Crude Oil and New Lows for the Dollar Index.” […]

  9. Don-Da-Mon Says:

    Corry, thanks for looking. Yes I was aware that clicking the title normalizes the prices of remaining items relative to that one. However, I was wondering if there is a tool or something that could annotate to get tech analysis on such a chart. Everyone hoping for a pullback and if viewed this way , did the $SPX have a XX%? retracement in May? Was that the pullback? Would we have different resistence/targets? It looks more like a ABC correction. Charting just the $SPX gives different formations i.e. rising wedge.

    Thank you for this blog and being so responsive. Your politeness, as an example, has changed how I respond to others as I see how much this community is enthusiastic about contributing.

  10. Bob Says:

    Interesting to consider the impact of the USD on certain sectors of the market; the slide of the US dollar leans toward “inflation”. While inflation hasn't been a problem yet and deflation appears more troubling now, it is certainly a concern and something the Federal Reserve would care to minimize.

    With the US dollars decline, commodites such as steel, oil, gold, etc. all become more desired, offering a safehaven of sorts; flight to quality and tangible assets.

    As the USD has declined, commodities and related stocks are rallying, not so much due to the underlying commodity values changing, demand picking up or inventories falling, but I'd speculate it's more a result of the change in the value of the dollar.

    There also appears to be a rotation into multi-nationals occuring too. There, non-domestic revenues increase as the dollar declines relative to other currencies.

  11. Bob Says:

    Interesting to consider the impact of the USD on certain sectors of the market; the slide of the US dollar leans toward “inflation”. While inflation hasn't been a problem yet and deflation appears more troubling now, it is certainly a concern and something the Federal Reserve would care to minimize.

    With the US dollars decline, commodites such as steel, oil, gold, etc. all become more desired, offering a safehaven of sorts; flight to quality and tangible assets.

    As the USD has declined, commodities and related stocks are rallying, not so much due to the underlying commodity values changing, demand picking up or inventories falling, but I'd speculate it's more a result of the change in the value of the dollar.

    There also appears to be a rotation into multi-nationals occuring too. There, non-domestic revenues increase as the dollar declines relative to other currencies.