US Dollar Holds The Cradle Sell Signal

Last week, I mentioned that the US Dollar Index was “Pulling Back into the Cradle” to form a Cradle Sell Signal and price did inflect down off that level.  Let’s take an update and see how that structure formed and what might be in store now.

US Dollar Index Daily:

The “Cradle Trade” forms when the 20 period EMA crosses under (or above) the 50 period EMA (which is also called a “Golden” or “Death” Cross) and then Price pulls back into this specific crossover point.  It’s important because it gives you permission to use a tight stop and play for a large target, particularly if you expect a trend reversal to play out thanks to the crossover.

Price came up into the EMA crossover zone and formed doji candles (which are associated as short-term reversal signals) which added to the bearish picture.  It could be also that a Bear Flag is setting up in price which would set a target for roughly the $61 level which would correspond with the rising 200 day SMA which should act as support if challenged.

This is the structure, but currently the Dollar Index is rising (UUP (UUP), the Dollar ETF is up just under 1%) and most commodities are falling sharply this morning (as of this writing, GLD (GLD) the Gold ETF is down 2%, USO (USO) the Oil ETF is down 4% while.  Let’s continue watching these to see what plays out off these levels.

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