Has the market turned?

In my view, the odds continue to grow that the Financials have put in a short to intermediate term low.

This week, the FAS put in a higher swing high on the daily chart, the SP500 has made a marginal new swing high, the Volatility Index has broken down below support at the 30 level, and the US Dollar Index has given up all of the gains of its recent breakout. And though the market has been short term overbought as per the NYSE McClellan Oscillator, the market has still risen. Some of the European banks have also put in higher swing highs (DB, BCS). These are all bullish signs, especially since it is happening in the month of October, which is often times a bear killer.

To me, all of these things strongly suggest a short to intermediate term low has been put in, and dips can be bought. However, I beleive that part of the bullish move over the past week or so has been predicated on Europe getting serious with how it deals with its sovereign debt issue. They have been making the case that a new plan will be revealed at the next G-20 meeting, scheduled for November 3. I will be watching market activity leading up to and after this event. If the European plan fails to impress the market, then a retest or break of the early October lows would be increasing possibility.

I am still long 3 lots of FAS, at an average cost of 10.32. I have open orders to sell 1 lot at 13.65, 15.65 and 19.65. Depending on how the FAS chart sets up over the coming days and weeks, I might add 1 or 2 lots to my current 3, or if my sells get filled, I might put those lots back on. To me it all depends on the chart and the news flow.

Since this summer, my IRA is up about 15% on closed trades, and is up about 10% on the open trades. This has definitively been a good run. I want to stay focused on the charts and the news flow, and ideally book some profits at higher levels.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

I changed my mind again, Sunday 10/9/11

On Tuesday I had open orders to sell 1 lot of FAS at 11.65, 15.65 and 19.65. I began weighing the possibility of a continued downtrend in the FAS, which would suggest selling somewhere below the declining 20 MA is warranted (11.65) vs the possibility of Europe putting together a $3-5 trillion dollar fund to address their sovereign debt issues, which in my view would send the financials rocketing higher for perhaps weeks, months or even longer. I am also aware that the Best Six Months of the Year switching strategy popularized by the Stock Traders Almanac, is due to generate a long entry signal any day now. 

Putting all of this together, along with targeting large swing trades gains over multiple months instead of smaller swing trades gains over multiple days, I decided to pull the order to sell 1 FAS lot at 11.65. On Friday morning, the FAS hit a high of 11.67 around the open and then sold off pretty much the entire day until the close. My order would have been hit, and I would have pocketed a 10% gain on that lot which would have been nice, but I am still fine with having pulled it. Based on the current chart and my view of what might happen over the coming days, weeks and months, I would rather be targeting 50%, 90% and higher gains over this time frame. If the downtrend continues, then I still have 3 more lots to buy, and I am confident that I can manage the average cost in an advantageous manner.

FAZ appears to be carving out an ascending triangle since August. Ignoring the news and just trading off the technicals, suggests to me that the correct side of the Financials trade is to still focus on the short side. But for the reasons noted above, I am currently focused on the long side.

The European Financials that I have been tracking continue to carve out a basing pattern (UBS, BCS), or a pattern of higher highs and higher lows (DB).

The US Dollar Index continues to break out higher from its base, while the SP500 continues it choppy move down.

Gold looks like it is trying to hold onto its daily uptrend, but Silver looks like it is continuing its downtrend, with a series of lower lows and lower highs.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

US Dollar Index and Precious Metals update, Sunday 9/25/11

Back on 9/20/11, I wrote that recent history suggested that when the US Dollar Index, rallies, the SP500 trends sideways at best, and down at worst. At that time, the US Dollar Index was breaking out of a 6 month range.

Now the range break continue to the upside. I believe this strongly suggests that the SP500 will continue in its sideways range at best, or downtrend at worst.

Looking at the Precious Metals, GLD (gold ETF) suffered its largest weekly loss on a percentage basis in many years. At best, GLD remains in weekly uptrend.

SLV (silver ETF), suffered its second large weekly loss of the year. At best it is clinging on to a 7 month base, but that looks to be in jeapordy, and another downleg into the mid to low 20's might be upon us.

I am not sure how much of a relationship these two metals have with the US Dollar Index though.

Disclosure: No positions in the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

The US Dollar Index is breaking out of it's recent range, but does it mean anything to the US Stock Market?

The US Dollar Index is breaking out of its recent range, but does that imply a high odds move in the SP500 in a specific direction?

When the US Dollar Index rallied from mid 2008 - early 2009, the SP500 (SPY as proxy), dropped. When the US Dollar Index rallied from late 2009 - mid 2010, the SP500 chopped sideways in a sloppy action. Now that the Dollar Index has broken out of 6 month range, if it begins to trend upward, does that portend sideways/downward action in the SP500?

Based on market behavior for the past 6 years or so, it does.

Disclosure: No Open positions in any of the securities mentioned.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***