Click on Chart to EnlargeThe US Dollar took a big hit Friday, but remains above last years low. Sentiment is very negative and could lead to a major reversal. The chart above shows a price oscillator which is nicely bullish divergent and is coiling suggesting a breakout soon. Also, the weekly oscillators are in a nice bullish divergence as well. A move back above the dashed green line would be a reasonable long trade entry signal.
News got around that PIMCO is net short the US treasury bonds now, which suggests an inflationary stance (falling bonds and rising yields). I just think this may be a nice contrarian sign that the dollar may reverse after the news is out.
Click on Chart to Enlarge The move up in the S&P 500 since mid March has now equaled the time of the correction. Also the S&P did not make a new high, nor did the Nasdaq. So, it is likely that the psychological trend is still in a correction. I expect the market to at least pull back from here toward the 1295 mark, but possibly a lot lower.
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