JUN 3 INDEX UPDATE - US DOLLAR TANKS, GOLD BREAKS, CAUTION FLAG!!
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SHORT-TERM TECHNICAL READINGS:
DOW - CLASS 1 SELL
SPX - PENDING CLASS 1 SELL
OEX - PENDING CLASS 1 SELL
NAZ - PENDING CLASS 1 SELL
NDX - PENDING CLASS 1 SELL
XAU - UPPER MIDRANGE, POSSIBLE BREAKOUT TO UPSIDE
GOLD - PRICE BREAKOUT to UPSIDE
US DOLLAR - TECHNICAL BREAKDOWN, NEGATED CLASS 1 BUY SIGNAL
VIX - PENDING CLASS 1 BUY(inverse to market)
CBOE PUT:CALL RATIO - .41
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CAUTION FLAG!
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Per my short-term technicals, there is alot which are lining up and calling for a short-term(1-5 DAYS) top. I did have fears on FRIDAY that the NAZ/NDX may be on the verge of NEGATING my CLASS 1 SELL SIGNAL(TECHNICAL BREAKOUT to UPSIDE), since the NAZ/NDX closed at their intraday HIGHs. To further explain, the window for the CLASS 1 SELL SIGNAL was until FRIDAY(JUN 2) highs, but it is very common that the on the last day of the WINDOW for my CLASS 1 SELL signal, the index normally closes off of its intraday highs, forming a DOJI/SPINNING TOP/CANDLESTICK with UPPER SHADOW. If the NAZ/NDX do not pullback some on MONDAY, or at least close of of its INTRADAY HIGHs, that would be a hint that my CLASS 1 SELL signal may be negated and that the STRONG UPSWING could continue.
Saying that - LOOK AT THE US DOLLAR/GOLD/TYX. A major issue may be on the horizon which made me raise my CAUTION FLAG. I dont know if we the market/indices will set LOWER LOWs, but if the US DOLLAR continues to deteriorate, that should have a strong negative effect on the stock market.
The following are INTRADAY CHARTS of the US DOLLAR, GOLD, TYX
quotewatch.com
kitco.com
quote.com
From the above intraday charts, you will notice that the INTEREST RATEs(TYX) dropped more than a FULL point at 8:30 am, right after the economic news. HOWEVER, around 8:50-9:00am the rates reversed and recovered almost all of the early morning drop. For the DAILY CANDLESTIC it was a VERY LONG LOWER LEGGED DOJI(tiny upper shadow, and some would just call it s HAMMER. Regardless, with that VERY LONG LEG, its a reversal signal, implying that rates should rise at least for the short-term.
Keep in mind that the BIG DROP in INTEREST RATEs before 9:00am FRI, which was caused by the good economic report, helped fuel the strong rally in the stock market. However, it appears the stock market ignore that the INTEREST RATES rose through out the day. Will the stock market be able to ignore it again if rates continue to rise next week.
Now we get to the big issue. Look at the intraday chart of the US DOLLAR and you will notice that the DOLLAR dropped dramatically in the 8:30-10:00 timeframe. I strong suspect that this was the reason that the TYX(INTEREST RATES) reversed back to the upside in the same timeframe.
Two days ago I got a CLASS 1 BUY signal on the US DOLLAR, but with yesterdays strong drop, that CLASS 1 BUY signal was negated, which is my definition of a TECHNICAL BREAKDOWN. Such implies that the US DOLLAR could drop alot more. For those who are not familiar with my NEGATED CLASS 1 SIGNALs, heres a good example. Around APRIL of 1999 when the DOW was around 10,100 I got a CLASS 1 SELL SIGNAL which was negated. Thereafter the DOW ran to the 11,000+ range in about a month.
Now the intraday chart on GOLD. In the same timeframe as mentioned above, GOLD JUMPED about $9.00 from 273 to 282. The CRB also had a strong move up.
So with the US DOLLAR moving down and INTEREST RATES/COMMODITIES moving up, I strongly suspect that such will eventually become a big negative for the stock market if it continues. Now the question is will the DOLLAR/RATES/COMMODITIES continue their trend. Im not an economist so I will leave it to others to give an explaination based on fundamentals, but lets put it this way - currently there are no technical indication of any significant reversals in the near-term, so Im more inclined to say that the currents trends would continue for at least the near-term.
If the current trends in the DOLLAR/RATEs/COMMODITIES continue on MONDAY and follow-thru for the rest of next week, things could get quite nasty and I would not ignore the possibilties of retest of the recent lows or even LOWER LOWs. Frankly, this could be a set-up of an environment for a PANIC CYCLE PHASE for the market which could cause the stock market to, at least, retest the previous lows. I'm not saying that it will happen since I dont believe in making the big/huge call, but I cannot ignore the possibility of such occuring. If I had to guess, I would guess that there is much less than a 50:50 probability in calling a PANiC PHASE correctly so I wont put a whole lot into it, but strongly suggest to watch the DOLLAR for further deterioration. Regardless of a PANIC PHASE, if the DOLLAR/RATEs/COMMODITIES continue their trend for most of next week, that would be a significant negative for the stock market and we should see a short-term top as early as MONDAY.
Right near the CLOSE on FRIDAY, I attempted to get XLK JUN PUTs but my limit offer was not executed. The XLK is one of the SPYDERs which follow the NAZ/NDX closely. If you look at the XLK CHART there is a PERFECT SHOOTING STAR.
Again, my CAUTION FLAG is flying. Its only a caution not a certainty, but we need to watch the US DOLLAR carefully since something BIG and BAD could be on the horizon.
seeya |
