Dollar Up - Stocks Down

As I mentioned yesterday, despite the fact that some technical indicators show bullish signals on intraday time-frame, sometimes it is useful to take a look at longer-term time-frames. Yesterday’s bullish signals were caused by the yesterday’s afternoon rally. Yet, when longer-term sentiment is bearish we may have strong swings down as we had today at the market open.

This is common misunderstanding when a trader asks to give him/her one chart setting that would work all the time. If you locked in one indicator, in one chart time frame, sooner or later you will get caught in the situation like today’s drop down and all your profits will be wiped out. You always have to look beyond time-frame you trade. This is what helped me yesterday to avoid playing long. Yes, I did not play this morning’s swing, so what – I did not lost and I had plenty of time at the morning to reanalyze the situation.

At the current moment the technical analysis is bearish on all time-frames. The Advance/decline on the S&P 500 and NYSE Composite indexes readings are extremely negative as well. The good news for Bears and bad news for Bulls is that the today’s decline, so far, have not generated any volume surges. Absence of increase in trading volume during decline suggests that current decline does not generated panic selling yet.

US Dollar index is up by breaking its high seen on November 16. As I numerously mentioned over the last month, stronger dollar supports correction down.