Dollar index gained sharply in the past few days, and formed a daily and weekly close above important resistance; 76.70- July 2011 high. In fact, we can see that price is threatening the upper channel resistance line, where a breakout in many cases confirms a further impulsive rise of wave three. As such, this is another very important evidence that dollar index has bottomed and that prices are now headed towards 81!

Dollar Index chart is attached!

On of the most important evidences for a higher US dollar is definitely the US stock market which is headed higher as technical outlook for the S&P500 (cash market) suggests

It seems that the US stock market has already reached a top. Subscribers who are with us for more than 2 months will know that we were monitoring a flat correction in wave (4). This outlook has now became a primary labelleing again with wave (4) low in place around 1257, followed by a TRUNCATED wave (5), as prices within this leg did not reach a new high. This type of structure appears extremely rare, actually we do not like this kind of labelling to be honest, but based on current price action, it should be the best idea however, because we go with the price, which is falling.

So if we are correct, then price should continue lower as sell-off in August appears to be wave 3) (or even wave one- ALT count), followed by a corrective bounce. In fact, a corrective move shows signs of a top at 1230 from where we saw quite sharp decline two weeks back, which we believe its start of another impulsive fall, headed towards 1000-1030.