Monday, October 3, 2011
BUY/SELL DUST $38.13/$39.13 - US Dollar and Stock Market
In this morning's pre-market I did not see much hope for the positive divergence trades I posted over the weekend, but it appeared to me the Direxion Gold Miner Bear 2X ETF (DUST) was about to change direction from down to up, so I bought shares at $38.13. At my lunch break it seemed that DUST was acting iffy and as I knew I would not be able to watch it for the rest of the day, I sold at $39.13 for a modest 2.6% gain.
Sure enough, within 45 minutes DUST was back down to $38.24 and my profit would have evaporated had I decided to hold that long. Over the next three hours DUST climbed steadily to reach $40.75 before settling down to close this day at $40.52.
Today the U.S. Dollar Index did what I said in my weekend post it had to do - it had to rally sharply higher to keep it's prospects alive within a wedge formed by the True Strength Index (TSI) indicator on it's daily chart. If the U.S. Dollar Index now breaks up through that wedge I can guarantee you all kinds of (bearish) hell is going to break out in the stock market. My hunch is that is exactly what is going to happen.
This is a daily chart of the E-Mini S+P 500 Index Futures (ES) snapped just after today's session on the NYSE concluded. Unlike the U.S. Dollar Index that is awaiting a trend line break of the TSI indicator, the S+P 500 price movement today has already yielded a trend line break signal - SELL.
My TSI Trading record has been updated.