Sunday, November 21, 2010

Short Trading Week

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The past week could be characterized by strong decline during the first half of trading session on November 15, 2010 and by strong advance during the first 30 minutes after the the market opened on November 18, 2010. The rest of the time we had side-way trading. By the end of the trading on Friday, the indexes (Nasdaq 100, S&P 500 and DJI) were just a little bit below their Monday's opening levels.

As I already mentioned on Thursday (see "Advance/Decline" post on November 18, 2010), despite the strong advance on that day the longer-term charts (based on the daily bars) continue to indicate bearish sentiment. On the other hand intraday timeframes (with exception of hourly charts)  have some bullish signals. As an example, Money Flow on the 15- and 30-min charts points to the possibility of positive opening tomorrow. The index futures and emini index futures are already traded more than half percent up. If they stay on the same level overnight we may face strong swing up at the market open.

The coming week is not very reach on economic reports. The only thing that may push stock market into volatile trading is Minutes of FOMC meeting on Tuesday, November 23, 2010 around 2pm. In addition There is no trading on November 26 and there is a short trading session on November 27.

There is a lot of attention has been around US dollar over the last month. The S&P 500 index was highly correlated with US Dollar Index. Most likely we will continue to see this dependence. Yes, the Indexes show strongly overbought levels on the longer-term charts and many technical indicators, including money flow, suggest the good odds of stronger that we had correction. If the US Dollar continue to go up as it went up two week ago then most likely the indexes will decline deeper. Yet, if the FED manage to push US dollar lower, we may see indexes back to their high levels seen in the beginning of November.

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