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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Maybe it's too early for this to tell us anything, but as of 11:40 PM EST, the Australian stock market is down .05%
Yes, that is coming on good fundamental news for AUD. NZD now -.43% and generally dollar is rallying. It seems like the dollar rally may finally be starting. Equity and commodity futures also down. Perhaps the technical setup is finally playing out and we are not getting that technical failure. We'll see how they open.
As of 10/12/09 at 9:08 AM ET, Australia SM is down .20%
US futures point to modest losses. 10/12/09 9:57 AM ET
I wouldn't hold your breath waiting for the dollar to rise because of economic prosperity. The only reason the dollar will strengthen in the foreseable future is in an environment of tightening of liquidity. A very good book i've found on the subject is from Richard Duncan called "The Dollar Crises" written in 2003. The only thing i didn't like about the book was the title. In the book he admits he's not sure whether the US will have an inflationary crises or a Japan-like deflation.
I've been thinking since the markets look six or months forward and there are no further stimulus plans in the making, this could be enough to cause a melt down.
Even though much of the US stimulus has not been spent yet, I'd think it has already been built into the markets. If the US starts seriously talking another stimulus, all bets could be off, unless a second stimulus won't be enough to push the market up a second time.
I'm not looking for a meltdown, just a healthy pullback that sets up a real bull market.
In my opinion the technical setup that favors a stocks decline and a dollar rally seems to have failed. A strong up day on increased volume today will confirm this. If that's the case then we are looking at a fresh stocks breakout and a move similar to that off the July bottom.

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