The rally in stock index futures -- up 17% on average from the July lows -- has enhanced the allure of the dollar as investors search out the best relative gains in an idling global economy. September dollar index futures (DXU2:NYBOT) triggered Monday out of a
pullback from a high setup in an outside bar that constructively ended the day above the past five sessions' closes. As detailed on Aug. 8, the dollar index has logged a critical mass of nascent momentum signs, demonstrating it has the potential to trade to new multimonth highs. The dollar index also held above a recent tight cluster of support depicted on the next chart. A close above 108.50 works to confirm this market's upside potential. The September S&Ps (SPU2:CME) continue to show conviction off their July low at 771.30, setting the stage for the index futures to be drawn to the 973.00-975.00 area. If the S&Ps breach this area and close above 980.00, that would clear the way for a test of 1021.00. From a timing basis, it is interesting to note that this market is already showing the potential for a time turn (a trend change) on Sept. 10, one day before the 9/11 anniversary and just 15 trading days from now. (See last Thursday's column for a review of Fibonacci time cycle ratios.) Should the S&Ps pull back Tuesday morning from resistance off Monday's 952.30 high, intraday support and defined-risk, dip-buying opportunities for Tuesday reside at 936.00, 931.20 and 923.00. September T-bonds (USU2:CBOT) took their second-biggest tumble of the year Friday after running into a cluster of Fibonacci time cycle ratios mentioned last Thursday. The steep slide off the timing cluster bolsters the argument that the Aug. 14 high at 112 12/32 is an intermediate-term high, meaning T-bonds should work lower from there for the next few weeks (barring an invasion of Iraq), with the next stop at 107 12/32. For Tuesday, in the event of a move higher, intraday levels to test the theory that T-bonds will continue their slide are at 109 13/32, 109 24/32, and 110 9/32. The fact that December gold (GCZ2:COMEX) broke down so forcefully Monday, tanking 7.7 to 307.7, demonstrates the strength of the highlighted resistance band -- on a closing basis -- at 317. Short trades from the 317 area were difficult to hold overnight because of two gap-up openings last week. But if you remained in the trade, or re-entered short, Monday was payday. With weakness continuing to exert itself, the stage now appears set for December gold to break the 301 low set on Aug. 1. Gold seemed particularly vulnerable Monday to the dollar's strength. Also in the metals, December silver (SIZ2:COMEX) continued waterfalling after triggering a short trade out of its pullback from low setup last week. The powerful downside momentum implies a test of contract lows. In a testament to its upside momentum, December cocoa (CCZ2:NYBOT) has added to or sustained gains in 11 of the past 12 sessions, breaking out of a Cooper Rule of Four setup along the way. While I normally do not place much emphasis on a single Fibonacci price projection, watch the 161.8% projection of points A-B, depicted on the next chart. If a pattern setup occurs at this projection area around 1911, consider lightening the position or tightening a trailing stop. But again, despite this short-term potential speed bump, the trend is definitely up in cocoa. Also from last week's Commitment of Traders Report, there was not a large decline in the number of speculative shorts, meaning the market can still be boosted by a short-covering rally as speculators close out losing short positions with offsetting long trades.