A Few Loose Ends/Updates

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Last week I highlighted a possible bullish flag pattern in the US Dollar Index. Today's decline breaks that pattern. However, If the uptrend remains in force, then it should find support at the lower bollinger band where it is right now. Also, the RSI(5) is oversold and that will typically lead to a bounce in a nice trend. The recent move up in the US dollar has caused some early signs of excess speculation which is has led now to a pullback. In 2008 we saw a similar thing, which led to a sharp, brief pullback and then much more continuation of the uptrend. So my take is that this is a buying area for an uptrend continuation, but any substantial further declines from this point, could change my mind.

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About 3 weeks ago I highlighted the above ascending triangle in the QQQQ. It did break to the upside obviously. And so I wanted to just highlight where it is now. The pink lines show the widest leg of the triangle and that leg projected up from the breakout point. That is the first target, and it has been met and seems to be forming resistance around that level. The next target would be around where the move up from the end of the triangle equals the move up prior to the triangle.

If the uptrend is to remain intact in stocks, expect QQQQ to be able to hold above the breakout level as a support level. Another more subtle note is that the thrust out of a triangle like this will typically end a good bit before apex of the trendlines. The often there is a move back down to the breakout area within that apex time frame as well. That is still a week or more off yet, but at this point, I think that would be the most likely outcome. But there is options expiration this week also and that has bolstered stock consistently since the March lows.

If there is a late day sell-off today, the stock indexes could form solid bearish reversal candlesticks which may justify an earlier entry into an intermediate term inverse ETF trade, but it is too early to tell right now.