Strategy Centre

Analysis & Views

Dollar index continues to hold four-year trendline resistance

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I looked at the dollar index earlier in the month as we approached this important trendline resistance and it is worth revisiting the subject, because we have spent the whole of November testing this trendline, but failing to break above it, as you can see in the monthly chart below. You can also see at the bottom of the monthly chart, that we have become quite overbought on the stochastic oscillator. There is a potential negative warning there as the lines start to cross over. The red line you see is the 200 month moving average which is at 89.89 as I write and this also ties in with important longer-term Fibonacci resistance around the 89.70 area. It’s clear therefore that we are approaching quite a lot of resistance when you also factor in the highs for 2010 at 88.70. The high for this month so far is 88.44, which was hit at the start of trading this week. A look at the weekly chart below gives perhaps a slightly clearer picture of how the index is being held by this important longer-term trendline resistance. The weekly chart is also…

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The VIX, Volatility and volume

Written by admin

There has been much talk of the VIX and the currently levels of volatility within the markets. What does this mean for you the trader? Firstly we have to understand what the VIX actually is. “VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge.” When trading, especially in the short term, it is very important to understand how the VIX, volume and volatility will impact your trading as we step in the Christmas. Although the VIX indicates ‘fear’ it does not mean that you should fear the market conditions, if anything with adequate risk reward you can use this to your advantage. Fear – Higher the VIX the greater the fear Fear means that markets may act irrationally. Markets move 80% of the time technically and 20% of the time fundamentally. When fear is driving the markets the 20% is much more prevalent. You can use this to your advantage when making…

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