BullBear Trading: Stock and Financial Market Technical Analysis

Here are some charts that seem to suggest that this very low volume spike to new highs may have been an exhaustion move in stocks concurrent with a bottom in the US dollar.


On the SPX futures we have an overnight gap up over the long term downtrend off the 2007 high on a holiday after a light volume run. Price was rejected after marginal new highs and the short term uptrend has been broken.


On NDX futures we see that price failed to achieve the upper return line of its intermediate term uptrend making marginal new highs before being rejected. The uptrend (previously violated) from the July low is being threatened as well.


The Dow futures rallied to new highs, piercing its intermediate term return line as well as the downtrend from the 2007 highs creating the kind of "throw over" that is typical of an important top.


The Russell 2000 and financial stocks are showing extreme underperformance and non-confirmation of the new highs.


The US dollar index is still arguably showing a bottoming process. Today's intraday reversal from new lows is not shown.

I would look for a higher volume down day very soon that ends near the lows for the day to indicate that a top is in place. A 2-4% up day for the dollar with a clean technical break of trend resistance should accompany this. If we don't see that kind of action in the next couple of days, then the equities rally and dollar decline are likely to continue.

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If Asia and Europe are strong and we see a strong NY open on good volume it could mean that we are seeing an upside acceleration and major breakout in stocks and a downside acceleration and major breakdown in dollar. In that case the formation we have seen on the SPX chart since August is then essentially a 3+ month basing pattern followed by a breakout. This is looking increasingly likely. I think we will know tomorrow.

If that scenario plays out, then at some point the dollar will strengthen on increased demand for world trade and us dollar denominated investment assets, essentially bypassing an initial dollar rally phase based on a stock market selloff.
What I find a little strange is that it shouldn't come as any surprise that Australia will raise its rates in December. Isn't that pretty much what they said they were going to do?
Yes but I believe they already did and it wasn't expected that they would do so again so very soon.

I think the surprise rally and turnaround in the dollar may have to come as US economic growth becomes more evident, which may be a couple of months away. Also world trade needs to show signs of significant acceleration. Demand for crude oil ect...
I don't know if this helps any, but these are the markets as of tonight at 8:19 PM EST:

UK up .69%
Germany up 1.04%
France up .76%
Spain down .09%
Europe up .83%
Japan up .05%
Hong Kong up .79%
China down .04%
India up 2.49%
Australia up .62%
Commodities are also up as well. I think crude oil could break out of its range tonight or tomorrow.
Hello Steven,

I just listened to the Monday night market report. I had a little trouble understanding Andrew Cardwell's analysis because I'm not at all familiar with RSI.

If I understood him correctly, he believes that the stock market could be range bound for a while yet he is bearish on the dollar? He seemed bullish on gold and silver regardless of anything that happens in the stock market? Am I getting this right? My apologies but, as you know, I am pretty new to a lot of this.

I'm not exactly sure what you meant when you said a little while ago you believe he may be right. Could you please tell me what you think he may be right about?

Many thanks,
BBG
Well he said he is giving the benefit of the doubt to the stock market uptrend and that if RSI breaks out of its downtrend on the SPX then we could see and acceleration to the upside in the index.
Thanks Steven.
I've noticed the S&P isn't following the AUD's lead tonight. AUD up .46% S&P down .30%. This is interesting.
You need to wait until much later in the futures market to draw any conclusions. I do think we will have many of our questions answered by the close tomorrow. At least on a short to intermediate term basis.
I agree, the next 2 days should be interesting. Oil might be key tomorrow. Bolingers have been tightening for quite some time and a move should be coming.
Thanks. If you have a chart of that please post it.

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