I figured I would provide a quick midday update. The market has broken down below the overnight range but it is too early to tell whether the downward action will continue or whether this is a little protrusion below support. Let’s look at the market internals.
All of the major thrusts on $TICK have been to the downside.
Likewise, $TRIN has been above 1 the entire day indicating decliners are outpacing advancers and that declining volume is outpacing advancing volume.
I would be very surprised to see the market close in the green today. The upper boundary of the overnight range was tested and failed, the Dollar is up and fundamentally traders are fearful of the Dollar approaching support.
I still think it was significant that UDN broke its trendline in October. While it bounced off the 50-day SMA, it looks very possible that this last thrust down on the Dollar (and move up on UDN) is a “kiss of the death” as it kisses the underside of the trendline before it falls.
Commodities are getting hit pretty good today.
USO is consolidating very tight. Notice the 50-day and the 300-day SMA are about to intersect. A move is coming and with the Dollar approaching support I tend to think that move is down.
Soft commodities such as livestock are rolling over today.
COW busted through its 50-day SMA and is now below is 50, 200 and 300 day SMAs. I sold off my position as I do not want to be long against all three moving averages.
Also worth noting that even though the large caps are making new highs IWM is still getting stuffed at the 50-day SMA. Look at all that down volume on the selloff and the light volume on this pullback.
So I’m sticking with my script from Sunday. I expect the Dollar decline to halt in the near term as it hits support. There may be a little more room to run higher as the Dollar comes down to support but if I am a swing trader I would not want to be in commodities right now. For example, if I had a nice run in gold, I would not want to own it here. Now if you are a longer term trend trader, perhaps you work through the pullback if you believe the downward trend will continue after a consolidation period.
Finally, I installed caching software today and from my end the site loads much faster. I know if I am visiting a site and it doesn’t load quickly I move onto my next stop. I am excited about the speed improvement and for those with Wordpress blogs I highly recommend the Super-Cache plugin and the Google Libraries plugin.
