Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Gerald Celente: Why You Still Need Guns, Gold, and a Getaway Plan... - 23rd Jun 18
Cheap Gold Stocks Bottom Basing - 23rd Jun 18
A Trade War Won’t Be Good for the US Dollar - 23rd Jun 18
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Stocks Don't Follow the Dollar Index So Hold On!

Stock-Markets / Stock Markets 2011 Apr 18, 2011 - 03:06 AM GMT

By: Chris_Vermeulen

Stock-Markets

Best Financial Markets Analysis ArticleSo far in 2011 the equities market has made some sizable whip saw type moves that even veteran traders have had difficulty being on the right side of the price action. The year started out with equities being very overbought and extended making is virtually impossible for a low risk trader to buy on pullbacks. This was primarily due to the fact that there were no real pullbacks other than for a day or two which  was immediately followed by prices continuing to grind higher.


In March, we finally had the pullback everyone was waiting for which we caught 4% of the sell off using an inverse ETF. Then we saw the bottom a few days later and caught a 3% gain from near the lows during a rally higher. So as you  can see there have been three trends in the SP500 so far this year and we are about to see another sizable move unfold in the coming week.
In the past 8 sessions we have seen the market pullback slightly and the big question everyone is asking is do we get long or do we short here? Below are my thoughts and analysis….

US Dollar Index – Daily Chart
The dollar is still in a very strong down trend. As long as it continues to fall we should see higher stock and commodity prices. I do feel as though there is more downside for the dollar but its nearing an end. Stepping back and looking at the longer term chart of the dollar is very clear that it is getting oversold and sizable bounce should take place. If we see the dollar breakout of this falling wedge and start to rally you will want to be short stocks and commodities.

SPY ETF (SP500 Index Fund) Daily Chart
When comparing the Dow Jones Industrial Average and the Russell 2K indexes it is rather obvious that both have performed well this year and have broken above the February highs. The DOW was strong because it has it is exposed to energy stocks and with oil rocketing higher, it has helped those energy based stocks lift the index higher. The Russell 2K consists of small cap stocks and with the general public still being so bullish on the equity markets and investors are buying volatile, high risk small cap stocks to help boost their gains.
Now, looking at the SP500 it has yet to break the February high and this is because it holds several large tech stocks and financial stocks which have been lagging the overall market so far this year. Tech stocks and financials tend to lead the market and the fact that they are not is of great concern to me.

So going back to the US Dollar, I feel as though it has a little more downward motion left which will help get the SP500 to a new yearly high. Once the dollar rally starts, it will crush stock and commodity prices for several months.

Weekend Trend Conclusion:
In short, I favor the long side for both stocks and commodities, but that can change on a dime once the dollar starts to rally. There are many negative factors coming together that give me a negative outlook on stocks and commodities for the next 2-4 months and they are:

  1. Quantitative Easing is now done = rising dollar
  2. Investor sentiment is at an extreme bullish level = typically a bearish sign for stocks
  3. The Sell In May and Go Away is almost here…
  4. Earning season is here and that is typically a time when stocks get sold into = lower stock prices

My final thought is to keep positions small and be ready to flip positions from long to short and vise versa depending on what you trade…

If you would like to get more of my daily analysis to join my newsletter at www.GoldAndOilGuy.com

By Chris Vermeulen

Chris@TheGoldAndOilGuy.com

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.  


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules