Yesterday's powerful rally in the dollar suggests at least a short term low has been printed, which means stocks could take a couple of days to consolidate huge gains made in October. Actually, dollar and stocks have been in perfect inverse correlation for the last two months and if trend is to be continued, the fate of the stock market fully depends on the dollar. As the buck is now severely oversold I expect it will break the descending resistance trendline and rally for at least a week. It might even go to new highs, which should drive the next leg down in bear market for stocks. However, if it turns out that the dollar truly is as weak as ti looks, it would turn around quickly, which should push the stock market even higher. Anyway, two consecutive down days that were not bought and a possible trend reversal on USD suggest a stock market may see some weakness ahead. It is on neutral signal from now on.
What does this mean for precious metals? Not much, I think. Gold has been pretty resiliant to the yesterday's huge rally in the dollar and it looks like it wants to beat its own drum. The cycle is still young, the volume on this correction has been low and I expect gold will at least fill the gap at about 174 on GLD. Yesterday's narrow range trading even convinced me to buy some shares of DGP (double gold ETF) as addition to SIVR (silver ETF). However, when and if the gap gets filled, I'll probably just take the profits without hesitation as there is just too much overhead resistance in the 175-180 range on GLD.
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