US Dollar continue to rize

As I mentioned over the last couple of days: with volatility at these high levels, we should be ready to strong and sudden swings. High Volatility always have been a sign of mid- and longer-term bearish mood. On Sunday in my "Side Way Trend on Indexes" post I have pointed to the few signs that suggest dominance of mid-term Bears. Lets see if they will be able to break the low seen on November 16, 2010 on the S&P 500 and Nasdaq 100 - DJI's low was broken yesterday. Or it will be another session of strong swing at the morning and then side-way trading for the rest of the day (as we had over the last two weeks).

US Dollar index is up, and it looks like nothing will hold it from moving higher to the August 2010 levels. Stronger dollar is another force that support bearish trading.

I'm moving from 15- and 30-min harts to the 5-and 15-minutes time-frames. One of my rules is to lower time-frame on higher volatility or reduce bar period settings.

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.