LET'S LOOK AT THE US DOLLAR INDEX-MONTHLY CHART FIRST

On CNBC two weeks ago I said the Dollar Index was about to fall off a cliff. The Dollar Index was started in 1973 and yesterday came very close to a new all time low. The best way to view a price resistance is as a retracement within a range by dividing that range into 1/8th and 1/3rd. A ¼ retracement of a range is small and keeps the trend in a strong position. You can see the rally in the Dollar Index was only ¼ of the previous three and a half year bear campaign. That trend down also lost 3/8 of the value of the dollar so the last rally was weak by any standard. The next significant support would be a 1/8 extension of the previous bear trend or around 72. There will likely be a larger consolidation before that price is hit since it is still 5 points away. It is possible to see an outright panic to reach that price from this "pattern of trending" but that would likely bring in an international intervention of some sort. But the charts do indicate a serious down trending market.

NOW LET'S LOOK AT THE DAILY CHART

You can see the rallies have been weak and can't get even close to the previous lows nor close to the initial trendline. This is obviously a panic or capitulation move down. The first indication this move down is coming close to an end is if it rally more than 4 trading days. That doesn't mean it won't go lower but if that does occur the next low could be a low for a larger rally of ¼ to 3/8 of the move down since the August high. But this is a capitulating or a panic trend now.

LET'S LOOK AT THE S&P 500 INDEX

You can see the past 6 days the index has been consolidating the very large 2 day move up with a four day move down. Yesterday was not impressive with light volume for a Thursday. I still believe this index is entering a sideway pattern that is at risk of completing around the week ending October 12th. Remember we do need to see some distribution for this trend to end and I believe that is starting now. If it has any strength left it should show up from here after the normal counter trend down of four days. But I wouldn't get too excited at a new high.