Dollar Index - much higher in the long term?

As I often write, I like long term patterns to understand what's going on structurally.
The recent Dollar Strength pushed the €/$ below 1,06 with many commentators wondering if parity is coming soon.

In the short term dollar is quite overbought and could rebound, but what's going on under the surface?
Let's have a look at the dollar index and the long term chart show us a big risk of strong dollar appreciation in the future.

After almost 2 years of trading range, recently DXY rose above the important resistance 100.40
It's a monthly chart, therefore the eventual break-out will be confirmed on the 30th November.
But the chart lets me think that something big is going to happen in the next 1-3 years

Fundamental explanations could be many: 1) crisis in Europe 2) political monetary divergences between Fed and other major central banks 3) China collapse and flight to quality towards dollar 4) Global recession with the same flight to quality 5) Trump infrastructure plan, economy surprisingly strong in US and Dollar purchases 6) wars, etc etc etc.

We can find many motivations and it's difficult to say now what will be the cause. I think that in the next 12-24 months there will be a G20 meeting about the excessive Dollar strength and we could see another "Plaza Accord"(click for info)

Of course the opposite could happen: the breakout finishes in a "Bull trap" and this is going to be the multiyear top for Dollar. Because Bull traps exist and I could be wrong, this is my strategy. I am a Dollar Bull thinking since 2 years that €/$ parity is the "at least" the first target. Because of European situation I think we could see 0,90-0,85 within 2020.
But I also know that I could be overly pessimistic, so the strategy is:

a) Long term chart points to Dollar Strenght with first target on DXY at 104 and major swing target around 112-114
b) I expect (but could not happen ) a short term pull back (from 1 to 6 months). Therefore Dollar could return below the resistance and then to surge later
3) My Bullish Dollar plan will take a stop with DXY falling below 91. In that case the breakout would have been a failure
4) Optimal pull back should not see DXY to retrace below 97
5) Finally reminds that in the long term view, this bull trend will be over only below 80. Of course if this happens...the above called target probably won't be realized in the next years.

Let Enjoy this ride, remembering that excessive Dollar Strength will cause problems in the World (non only in the USA, but Asia and Emerging Countries), so be prepared for asset volatility if next leg up accelerates in 2017-18.

OCTOBER PERFORMANCE

Here the performance for October, where one model had a bad draw-down and now is just in light loss ytd
Others continues to perform well.

This month is quite volatile, let's see how models will perform. I'm quite happy that global rates are rising on the long maturities, hope it will happen in the short one to re- normalize the markets
As I always write in this blog, if Models will be able to surf a normalization of markets with flat returns, I'd be happy. I think most investors will have deep losses in that environment

THE WEEKLY VIEW- S&P, GOLD, TREASURY & EUR/GBP

Disclaimer: In this post I write my opinions and trading idea. If you choose to act like me, you are assuming your responsibility for your investment decision, because I could be wrong as every human being.

Good morning everybody, this week was quite volatile thanks to the unexpected (not for me, my office colleagues are witnesses :) ) Trump's victory. What surprised me was the market reaction. I believed that Trump was more equity friendly than Clinton, but I was quite confident that the initial reaction (at least for 1-2 weeks) would have been negative. My idea was a sort of pretty decent fall at the beginning, the break of 2000 level on S&P500, long short term traders washout, choppy markets for some weeks and new highs in 2017.
I was wrong on that, the fall lasted only few hours.

With this post I want to point out some variables to monitor in the following weeks, expected to be  volatile after the initial exuberance. I want to see it from a weekly chart point of view. It's a time period that I appreciate a lot and, according my experience, personal goals and character, is more adapt to realize what is going on. I also like monthly charts, while I don't like daily on indexes because of algos that can fake them easier

S&P500

Days ago I posted a similar chart on Twitter. I pointed out the risk of a Sma10-EMA20-30 weekly cross on the S&P500 in the next few weeks. In the last 2 times it happened, volatility increased sharply after the cross.
I want to point out few things:

• Every bear market began with this bear cross, but not every cross leads to a bear market (so don't scream when it happens, just be alert).
• In the last 2 events (Summer 2015 and beginning 2016) the cross came just close to the market bottom. But in the following 4 weeks market was very choppy
• Note above how the white weekly candle of this week could remind the one of July 2015. The environment is not exactly the same for the index (S&P500 was flat at that time, while at the moment market is decreasing since August and S&P rose above a short term resistance. The environment is pretty similar for the moving averages shape.

SUMMARY: this positive week reduced the fear of a moving average cross in the next 1-2 weeks, but be careful that in a time frame longer than daily, technical situation continues to show weaking. Personally, I won't yell out "Beware to be long, the bear is out" because long-term trend is still up. I continue to think that, if market will fall sharply before end of year, it's still a buy opportunity when Vix rise around 28-30%

GOVERNMENT BONDS

This is the ETF Ishares Core US Treasury Bond, a proxy for the Treasury market. As we can see, the sell off was very sharp, but it is approaching a support area . Volatility could continue, but I believe that, at the moment is quite likely that the ETF will rebound at the first touch. I'd buy around 24.50 if touched to sell 0.80-1$ above on the rebound

GOLD

Gold is going to have a moving average bear cross. The question is...will it be like in 2013 or will be similar to the last few years,where gold was quite choppy after the cross? I think it's not yet ready to crash like in 2013. First the area between 1200-1150$ has many supports, second Gold suffered the fast rise in Governmente bonds interest rates and, as I said above, a rebound is likely short term. Important: the ETF gold amount is still rising, meaning that institutional investor are buying and the sell of is probably linked to future action (speculator?) I think Gold will go choppy in the coming weeks. I'd be a buyer if drops around 1150$ (Disclaimer: I've already have a long term structural Gold position).

EUR/GBP

Let's return to the Brexit theme. Brexit had a temporary stop with the High UK Court decision. Now the word passes in January (probably) to the Supreme Court. In UK the chances of earlier elections increased, but the situation is quite random. Probably, neither the Premier Theresa May nor MPs know how they will act in 2017. I continue to buy sterling on weaknesses (I bought shy above 0,85 and above 0,90) but I'll wait the Supreme Court decision for the next purchases.
Technically uptrend is still strong and between 0,87 and 0,83 there's a strong support area. I'd be careful buying sterling further at this level after this strong week. Better buying on weakness.
I'd continue to be a seller of all Sterling, before Supreme Court decision, if Eur/Gbp fall towards 0,80 area. I could reduce exposure at 0,83.

November Allocations

Here the allocations for November.
Some models are suffering in these first days