DMA 3 March 2010 - rebirth of a small bull

Over the past two days, the SPX has turned bullish, and has other following markets. In fact, we saw the beginning and confirmation of the bull’s birth on Friday night when singaporeseeds and myself were discussing about the market and were exploring the E-mini tick charts. I had marked out a buy on /ES and it was a good call.
Let’s see how technically the markets are turning bullish, and how much more we can go…

/DX (USD Index)
The theme is still that the USD is king and calls the shots… although in a broad range, the markets are pre-reacting to the USD fall. The USD appears to be falling out of an overbought situation and quite possibly to mount another rally later (which should tank the markets – SPX, commodities, etc.) below is the chart of the USD in daily and hourly, which clearly shows a bracketed range. The uprising trendline on the daily /DX chart show that the uptrend is still intact with a probably breakdown of the range and then a possibly bounce off the trendline from its oversold levels. Fundamentally, this may give time, indicative that Greece still has time to delay default till April/May 2010… when that happens, the Euro should tank hard, forcing the USD to make a beautiful rally up (being wave 5 of this rally incidentally).








/CL
Crude is also very bullish on the USD decline but seems to have hit resistance. Although some analysts are predicting a break above 80, and into the 90 region, I am skeptical for now.

/GC
Unlike Crude, Gold is a laggard in this run up and is making up ground lost. Breaking out of a range, it gapped up today and keeping this gap open would be essential. The long term GC charts show that Gold may be at a pivotal point ready to rally once again. For this to happen, one would expect a case for the USD to fall. Let’s see how this turns out… and if Gold will break the dollar relationship. A good reason why this may be so is that Gold is also priced in Euros, and if the Euro is in trouble, skewing the Euro:USD relationship, Gold’s relationship with the USD may be skewed as an indirect effect.








/ES
At current time, the ES futures are looking for a breakpoint. Taking in line with the USD futures, it should be heading up later today.



SPX
In line with the USD decline, and falling out of range, the SPX should be heading upwards. It has broken out of the 50MA, and this is where the spike before the fall may come in. The Fibo target point places this current rally target near but not above the previous top. That’s not too good… and that changes my earlier outline of the SPX outlook, brining expectations in line to a possible timing in April/May (read as Grecce).
We should see a mild bounce in the USD, then followed soon by a breakdown of the range. This should push up commodities and the SPX in general, until such time the trendline for the USD is tested.
Below is a change in the expectations...




Note: Any material posted here is my sole opinion, and the opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational and discussion purposes only.