HUI Convergence Test
posted Jan 25, 2005 at 07:35PM
The last few posts have seen a lot of attention this ratio. Conventional wisdom is that when moving averages converge the result is usually some kind of strong move in one direction or the other.
A strong move up through moving average resistnace would have been a nice technical buy signal...obviously that did not happen. Today's price action is a bearish omen and, to me, says the time is not quite ripe for buying.
With the USD nowhere close to overbought levels I think it is too early to be bottom-picking. I would wait for a technical buy signal on strength.
Is now testing the 200 zone. The key support is the trend-line support and the 190 level (which has important EWA considerations)..If the USD rally is just a correction then these levels should hold. If it is impulsive then they probably won't.
If this is a one day wonder within a correction, then it should not go too much further. A move back below the 50dma would give credence that this was a techncial rally.
If this is the start of an impulsive move higher then the USD should clear 85 in fairly short order. After 85 a lot of leveraged bets that are leaning the wrong way, are going to start getting "worried"