I want to begin by answering a question I have gotten so often in the last few days. Why did I draw the line on the Invesco QQQ (QQQ) starting in mid-April and not at the March low?
There are few rules when drawing a line. This is an art, not a science.
I use basic geometry: There are two points on a line and a third confirms it. I go on to believe that the more points on the line the better the line. So when I look at that black line, I see approximately six touches starting in mid-April, early May, mid-May, mid-June, late June and last week. It has touched the line every month since the middle of April, so it seems to be a good line. It's also not terribly steep. Steep lines get broken; flatter ones tend to hold and be more meaningful.
Many have drawn in something close to the blue line since it begins at the March low. I'll be honest, when I went to draw it in for you I was uncertain which low to connect it to. Like should the March low connect to the early April low? If that's the case, then this should have broken back in May. How helpful is that?
So, I went with the one I drew in (blue). And keep in mind, this is just my own opinion, it's not a great line. There are three months in between the first touch and the second and then there is two weeks ago. and last week's break. Here's what would be useful on this blue line: If the QQQs fail to get back up over it and turn south. That would tell us it is a resistance line. It would also tell us that the black line is more likely to break on the next trip down. If the QQQs fail to make a higher high and tag the upper channel line (not shown) on this rally, then the chances of a break of the lower line goes up.
Statistically, there was very little that changed during Monday's rally, so I want to talk about the dollar. It has collapsed and in the process, it finally became the talk of the town on Monday. I was almost surprised my mother didn't call to ask about it, but alas she is not traveling these days.
Seriously, the Daily Sentiment Index (DSI) is now 11. That means another down day and it should get to single digits. More so, the DSI for the euro, which is the largest component in the Dollar Index is now at 91.
That is a big break down in mid-July on the Dollar Index. It should eventually measure to at least 90, but for right now, I think it is getting mighty stretched and if not Tuesday, then in the next few days I expect to see a snapback rally in the buck. If it can get to 96, I'd sell it there.