If true then the bear trap and bounce in gold will stumble on its next test of $1,000 and rollover as part of a cyclical bear market, while the dollar mounts a challenge of 2006 highs as part of its cyclical bull market.
The relationship between the S&P and the dollar is not so smooth. While the sharp advance in the S&P:dollar ratio has set this indicator on its way towards a bottom, it is well off the ratio which marked the 2002 bottom. Although I favour a decent Santa rally this year my expectation for a tough 2009 would look to be borne out by this relationship; perhaps we are in for a repeat of the 2001/02 collapse. Part of me thinks the nature of this year's capitulation should hold on a retest, but I suppose many would have thought the same of the post-September 11th collapse.
As for the dollar itself; it worked nicely off the ROC low but has now encountered some stiff technical resistance along with reaction lows in the 82-84 range from 2006. The long term declining trendline is history and a retracement into the Fibonacci area will likely coincide with a backtest of this line. This move down will be a false hope for shorts as the past reaction high in late 2007 was cleared relatively easily and 76 should hold as a reaction low.
There is always a bull market somewhere....
Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website