Monday, November 2, 2009

State of the U.S. Doll..I Mean Market - 11/2/09

We had another volatile session to start the week today on Wall Street, as stocks started strong, gave up all their gains by 2:00, but then bounced back to finish with some gains overall. The day started slightly higher, but around 10:00, there was a massive spike upward, with the Nasdaq gaining almost thirty points in fifteen minutes. The market consolidated a bit there but could not really get going again, and fell steadily through lunchtime and until 2:00, when they did bounce back up into the close. Volume appears to be lower as of now.

Technically, we had some indices and sectors break their October lows today intraday before finishing above them, namely the Nasdaq and XLF. This bears watching and as I stated last night, there should be some short-term support near those lows considering how oversold the market is. The S&P did not get down to test its lows around 1020 and may still need to do so before bouncing back, but who knows? Right now, the 1050-1060 area looks to be resistance for the S&P, and the 2090 area bears watching on the Nasdaq as that is where the 50 day moving average resides. The market does looked like a bounce is likely strictly based on the charts of the indices.

All of the above technical information, however, probably needs to be taken with a grain of salt, because as I discussed in the video last night, it is still the U.S. dollar that is controlling where and how this market trades. The dollar once again traded inversely to the market today, and since the dollar was volatile, the market was volatile as well.

Really, in my opinion, that's all that matters right now. The market looks like it could bounce here from oversold conditions, perhaps forming a right shoulder on a topping pattern. But with the daily chart of the dollar looking cautiously bullish, I would not be surprised at all if the market keeps falling, oversold or not. If the dollar gets above that $76.60-$76.75 area I showed last night, I do think all bets are off and this market could tank hard. That's what I will continue to watch for and plan my trades accordingly.

I will attempt to go through my individual charts tonight but really, I do have the sense that now is not the time to get heavily invested on either side, at least in individual plays. We have had some very volatile trade recently which is great for daytraders but makes things difficult for swing traders. If the dollar breaks out a bit more, then I would not hesitate to put my foot on the pedal in terms of going short but probably with just index shorts. However, if the dollar just consolidates a bit more, I think it makes sense to wait for a bounce to materialize before getting short in individual setups. Just my two cents. Good luck Tuesday.

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