The Dollar - pattern broke supports

This is an updated chart of the dollar from several days ago. This raises the odds of some lower probing...with downside targets in the 74.5 area. However, if the multiple turn dates occurring early next week play out the lows could still be in already and the dollar could make a huge move, otherwise it will be more of the same dribbling down.

Interestingly, the large healthcare reform bill being voted before congress may have large implications for the future of the dollar and interest rates. A plan as misguided with regard to debt and constitutionality is likely to cause some real issues with interest rates and could be a good excuse to get 3 of 3 down moving...but for now the dollar chart forecasts weakness.

Market Observations - Resistance and Black Candles

The Russell 2000 is an interesting index. It is comprised of a high concentration of energy and financial components. It is also represent speculative small cap companies, so you can gauge the market's risk appetite from it. Well, as you can see below, the Russell has to break its high. This is a difficult task given the strong resistance and overbought nature of this market. Additionally, the Russell has been lagging which adds to the difficulty but also demonstrates a tiring market overall. The Gap Up open with a close below the Open created a Black reversal candle. These are highly reliable signals especially when they occur at trend-line resistance with divergences. Something to keep an eye on.

If the market is going to reverse down or break resistance it has to happen imminently. There is no spare time. It is my impression that people are so tired of calling for a correction that most are looking up. While I recognize this possibility is not trivial...the downside case seem much better to me and upside seems quite limited.

US 30 year Treasuries - not a pretty chart...and not a good omen for the market. Clearly, Corporate Bonds and Treasuries have disconnected...The structure for the Corporate Bonds is very clear and it looks like the ABC pattern is complete. Look out below.

McClellan Oscillator had two small consolidation moves...Friday and today...this portends a large move of some sort is likely tomorrow. Either way you want to be on the right side of what ever that move turns out to be...and it seems likely to be down to me.

Market Observations - VIX kisses

VIX kissed the trendline...as expected. Now I am waiting for the reversal - should be quit a show.

The corporate bonds chart below needs no lables...Clearly the market rally is diverging with the smart money in bonds...we need to watch these bonds early next week.

My scenario seems to be coming together nicely...Dow pushed out a minor high extension and maybe we can get a little more from the SPX...but otherwise the market is most likely nearly done.

Market observations - Back Test Time

I would like to reiterate that there are gaps on the ES that need to fill in the 1074 area...In my opinion we have to test that area or exceed it. It is entirely possible that the market fails to make a new high and instead confirms wave 2 for our impulse wave down. This could be fulfilled with a move to the 1077 area on the SPX cash.

As you can see the VIX has made another attempt to break its down trendline. This is accompanied by a MACD cross and RSI over 50...something to keep a close eye on...VIX is currently only backtesting this trendline...it could drop below it again...or preferably consolidate and rally straight from here.

Transports had their huge sell day last week...the largest volume selling day in the $TRAN history. If the markets do continue up...into the Oct 2 to 7th area...any new high will not likely be confirmed by the $TRAN. This is a very good cue that these highs will be a top of consequence.

Oil is at an important support...and with the dollar showing strength today...it could easily break the down-trend line and take a quick trip to 57. The alternate view is that the dollar needs a consolidation and will allow for some upside for Oil - though that should not amount to much.

Agriculture commodities are struggling and remain below the emerging 2-4 line of the pattern...a break of that huge support line below will likely coincide with a strong move down. Upside looks like it would be quite limited...and this chart does not look healthy at all.

The dow could get its legs, in fact it has to tomorrow...otherwise this whole pattern, VIX, Trans and DJ look like simple backtests of resistance. Personally, I think there is some remaining upside...though nothing substantial.

Market Observations - Indexes at supports

This chart of the Russell 2000 Futures shows a major support at 595.4. After hours this level was touched. We should look for a bounce from these levels. If there is a break down from these levels (1039 on SPX and 589 on the Russell Futures) that would defiantly qualify as P3 type behavior. However, if we can bounce from here we may make a failed high and then take out support thereafter. We have a lot of unfilled gaps up to the 1077 area on the SP futures. I would like to see them filled. Also, there are a lot of good support levels shown on this chart as targets on the down side if we go that direction.

If there is a gap down on the open...watch for that gap to be bought.

I trade the TF futures and they are a very good momentum gauge for the markets. If they start showing downside outperformance....larger indexes will usually follow

Russell 2000 top vs IWM top?

We have a little divergence...IWM has hit it upper resistance...but $RUT cash still has a ways to go...interesting...

We are close...but how close?

Neck Lines Acknowledged

Dollar - Ending Diagonal Update

Dollar completes a small throw over and bounces back into diagonal - bouncing off the 2 - 4- line support area. Break of 78.35 would be the first step in confirming dollar rally - which likely could also be a confirmation of a stock market top.

SP500 Symmetry

Most common ABC patterns are where C = A. Well, that's clearly what we have here. Additionally, the timing window for Sept 11 market high I pointed out earlier. Things are looking rather complete to me. Breadth continued to  contract even though we hit new highs. Banks, Financials, Utilities, Agriculture and other metrics are not anywhere making new highs. Sentiment towards the dollar dropped to 4% bulls. Oil collapsed with no commensurate rise in the dollar...and is setting up a head and shoulders pattern.

This market is an exercise in frustration...but there we have it things coming together nicely.

SP500 Backtest Playing out NOW

Either we break out or rollover...in either case the parameters and stops are very close...

Low risk decision point IMO.

Market Observations

VIX was up today...the whole day including from the gap up. Utilities Continued their lackluster hold of support at their channel. XLF head and shoulders are progressing nicely. Breadth was not great today...2.9 to 1.

The story of the day was the dollar which fulfilled the Ending Diagonal potential that I have previously discussed. There could be a small throw over...but overall the Dollar's down move looks finished and counts pretty close to complete. Therefore, this up move in the market is on VERY thin ice. I had been worried that the move down in the dollar could be time consuming...but am pleasantly surprised that it essentially hit my targets in 1.5 days. That shortens this rebound in the stock markets considerably.

DBA was down today regardless of the dollar and Oil traded weakly even though it was up. I was trading oil and made most of the money shorting it.