January 15th, 2010 by 
Continuing with my previous posts on DZZ and UUP as potential contrarian trades against Gold and the U.S. Dollar, here’s the first update for 2010.
I say “contrarian” because several weeks ago they were, but maybe not so now.
Then again, I’m sure there are many out there who feel inflation and the ever increasing (or should I say “forever increasing”) government debt will continue to put pressure on the U.S. Dollar.
This post, along with the recent one’s, concentrate on a potential move lower in Gold and higher in the U.S. Dollar, some of which are:
- U.S. Dollar Update 12/02/2009
- U.S. Dollar Update 12/06/2009
- Gold Update 12/07/2009
- U.S. Dollar Update 12/29/2009
You can see on the first chart below of DZZ (Double Short Gold ETN) has made 2 attempts to move higher that coincide with the 50 day Moving average near the end of December, 2009.
Since then, prices have pulled back a bit. For any swing traders who believe Gold has further to decline in the coming weeks/months, this pullback may be just what you have been waiting for.
If in fact the downtrend in DZZ has reversed and an uptrend has begun, the current levels could provide a low risk entry while being able to keep a relatively close stop loss in place in case the downtrend has not reversed.
The next chart is of UUP (U.S. Dollar Index Bullish Fund) and shows a similar situation:
You can see that after the recent run up towards the end of December, 2009, prices have pulled back and recently bounced off the 50 day moving average.
Whether this initial test of the average holds or not, and if you haven’t caught this already over the last few days, now would be a good time to consider potential long entry points. That is of course, if you feel the U.S. Dollar has more room to go on the upside, against the mainstream.
Just as in DZZ above, UUP has pulled back nicely which is what a swing trader would want to look for when considering entry points.
Please do your own research and make your own decision on these potential securities. My comments above are based on my observations and I do not have a position in either of them at this time. I do on occasion use DZZ as an intraday and/or multi-day trade.
Feel free to add your thoughts on potential price movements from here on either of these below in the comments section.
