U.S. Dollar Index: Another Three Drives to a Top

Connected money flows have faded the rally in the dollar since early 2010. A trend change is usually a matter of technical deterioration once the money flows have setup.

Technical deterioration, however, is usually more reflective of a process than an event. In other words, it usually takes time and energy dissipation. A common heuristic that measures this process is three drives to a top.

The previous three drives to a top trend change occurred in early 2009. This “formation” or mapping of energy dissipation is illustrated below. This time measurement is characterized by the following: (1) An initial up trend line break, (2) a retest or slightly higher highs, and (3) another, weaker up thrust that fails.

The recent gap break of the up trend line on 4/12 suggests that one of the three drives has occurred.

U.S. Dollar Index: