Import ant developments are taking place in Precious Metals, The U.S. Dollar and long term U.S. Debt that need to be monitored closely.  On Friday, Ben Bernanke spoke and the markets reaction was very bullish for the dollar.  The U.S. Dollar ETF (NYSE:UUP) gapped lower during the week, then closed the gap through an outside bar reversal on the largest upside volume since the beginning of the decline in June.

This outside bar reversal on huge volume comes at a time when we have recently seen some reversals in gold and silver on huge volume.  This is indicating a change in sentiment.  The dollar has been in a 4 month downtrend.  I warned readers of a collapse in the dollar on September 15th followed by a bottom signal on October 7th.   Smart money seems to be ahead of the trend, and that is why I am alerting readers to a correction in precious metals and a rise in the dollar. 

Observe the price volume action since last week and the outside reversals in both the dollar and gold.  It indicates a counter-trend rally in the dollar and a correction in gold and silver.  During this correction I will be monitoring the gold and silver market for secondary buy points.  Over the past few weeks the equity markets- especially basic materials and commodities- have been rising on expectations of another round of treasury purchases.

 This exodus from the dollar into basic commodities has been extremely parabolic and a corrective wave may be beginning.  Speculation and leverage in gold and silver were reaching extremes.  The widely accepted quantitative easing that was expected at the next meeting in early November may turn out to be less significant than expected.  China’s attempt to raise interest rates, Geithner’s discussion of a strong dollar, and the Fed’s concern of Treasury prices is indicating the market was over exuberant in anticipation of another round of easing.  The dollar will continue to bounce as gold, silver and base metals correct.

Written By Jeb Handwerger From Gold Stock Trades   Disclosure: I am long gold and silver stocks.

ABOUT: I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love. In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family. Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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