After a strong uptrend for the past 18 months or so, the Dollar Index (DXY) could have a temporary downward reaction that could in turn spark a commodity rally.
In this Point & Figure chart of the DXY, above, we just look at price reversals. The DXY has been in a 93 to 100 range the past year. A decline to 95.00 would turn this sensitive chart to the downside. A break down under 93.00 could spark further selling if we declined that far.
In this longer-term chart of the Dollar Index, we can see a flat 40-week moving average with a weak Moving Average Convergence Divergence (MACD) oscillator. While we have two rallies to the 100 level, the second rally in late 2015 was weaker. The momentum readings for DXY were much lower on the second rally to 100 in late 2015 than the early 2015 rally. The major trend for the Dollar Index has been up, so I only look for a period of temporary weakness. This weakness in the greenback could spur a period of commodity price strength.
This is a chart of the DJP, above, is an ETN based on the Bloomberg Commodity Index Total Return benchmark. Recently, the DJP rallied above its 50-day moving average and the MACD oscillator is close to crossing above the zero line for a buy signal. It would be better if volume increased on up days for the DJP to turn the On-Balance-Volume line to the upside. Assuming the Dollar Index does decline, we expect that a number of commodities in turn to rally as a result. Get ready.