Wednesday, March 24, 2010

Keep an eye on the dollar

If you are bullish overall, then small down days like today really should not worry you. These small pullbacks are healthy and allow the market to regroup before making making another move up. The S&P closed right at support today. If this doesn't hold, next support -1160. What is beginning to concern me though, is the negative MACD divergence beginning to develop. Notice how the MACD is not moving higher with the market. We will see how this develops.

The big story today was the US dollar. It had a huge gap up. UUP hasn't reached these levels since July of last year. Keep an eye tomorrow on whether there are any signs of dollar trying to fill this gap. If the gap support holds, it could signal a deeper than usual pullback for the markets.

Naturally, the upside in the dollar meant that gold and oil took a hit. GLD got rejected right at the MA(50). Next support - 105.

USO shows a nice example of using negative MACD divergence to predict a pullback.

Personally speaking, as the regular readers of this blog know, I held a position in CSE going into today. This stock has been struggling to break 6 for ages now. It finally did manage to break it and I added more to my position 6.04. However, this was as high as it reached and I got stepped out of my overnight position at 5.96. I still hold today's position and it is smaller than the position I held going into today. I also took a position in MTG at 9.65. It closed at 9.50. Here is a weekly chart. As you can see, a break of 10 could really make it run. I won't get time to watch it tomorrow morning, so am thinking about how much room to give it to run and where to keep my stop.

Take care and good luck tomorrow!

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