Wednesday, October 14, 2009

Stocks and Dollar cross key levels

The stock market and dollar on Tuesday crossed key levels.

The dollar is on the verge of a breakdown and the stock market on the verge of a breakout.

Click all charts to enlarge:

SPX 6 month daily:

The SPX has been on a short term buy signal since Oct 07. Price has held up well and held a key support level I have been following when trading my personal account (1071.66).

All short term indicators are on a buy signal.

SPX 2 year weekly:

This market refuses to die. Price last week regained the 1050 support level. The weekly chart remains on a buy signal.

USD 2 year daily:

The dollar is in trouble. It has begun a free fall and there has been little-to-no attempt by the US government to intervene.

Key support at 75.89 was broken yesterday. Minor support now is at 74.48 followed by 70.70.

UUP 2 year daily:

UUP is the bullish USD ETF. Note it is well established in the down trending channel and looks to want to test it's previous low @22.00.

UUP 2 year weekly:

The UUP weekly chart reflects the same as the USD charts. All the indicators on the chart are bearish and, with the exception of the bullish wedge, there is very little to like about the USD.

The only thing that gives me pause on the USD:

1) the percentage of investors who are now bearish is 96%. This this is the highest on record.

2) in the options and futures market, the "commercials" (ie. the big boys) are heavily long the USD. These guys are the "smart money". The small traders are heavily short the USD.....these guys are the "dumb money".

Bottom Line:

Given the above, I repositioned my Provident Fund account as follows:

50% Fidelity Equity
50% Fidelity USD cash

I will watch the USD for the next several days before deciding what to do with my USD cash position.

Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author will reveal his current market positions and holdings but actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. The author is not licensed as an investment advisor in the UAE and therefore cannot provide individual account advice to individuals and/or institutions.


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