Quick Update

The market is moving in what I think is a little unusual fashion. Almost everybody thinks it's going to breakout to the upside from blogs I've read, etc. I will agree that it looks more like that to me as well, due to a sideways consolidation under the recent highs. On the other hand, the subtleties of price movement seem weak in that the market has not been able to retrace the recent little decline in less time than it took to form.

There have now been 4 doji type days in a row on the SPY ETF. That also seems weird, especially in the middle of a range. There is an FOMC announcement tomorrow afternoon. The OEX put/call ratio was high today (smart traders seeing downside risk), which may be just due to the potential volatility from the FOMC tomorrow. The bollinger bands on the daily chart are squeezed very tight. It seems like the market is waiting on something pivotal to drive it one way or the other. I'm not sure what it is.

There has been a strong tendency the last few years for the market to advance on the FOMC day. Also, it has been common for a gap up on the open. Additionally, the December options expirations week has been the most consistently positive for the last few decades. On top of that, there is generally positive seasonal tendencies for the next few weeks. These factors would suggest that we may be more likely to break to the upside from the recent range.

I would like to give the maximum room on the current SPXU trade, so I will just leave the stop as is. For those who got in around 36.69, I would really consider having the stop at 36.00 to allow the market to fluctuate in the recent range and only get stopped if it makes a new high. But don't move the stop down if it increases your risk beyond the initially planned amount.

Click on Chart to Enlarge

The US dollar index has shown the type of price confirmation that typically leads to a significant trend reversal. It has completely retraced the last significant swing move down in less time than the decline took to form.

However, the stock market has not reacted much. I was expecting the inverse correlation to hold more tightly, and in retrospect, I may have decided on the wrong market to pursue for blog trades when persisting in the attempt to catch a major reversal in stocks and the dollar. However, at some point we may see a sharp move in stocks to reflect some of what is going on in this inter-market relationship.