A rally in the dollar shook things up today. Financials led the indices higher while (dollar-denominated) commodities got sold pretty hard. Here’s a chart of the dollar showing something that resembles an Adam & Eve Bottom:
The dollar has a lot of work to do to get that chart looking healthy. A good sign would be for its 50-day moving average to be above its 200-day moving average and for the dollar to be above them both. There’s a lot of room for what could be viewed as just a normal retracement and potential for a short squeeze so I’ll be keeping a close eye on the dollar (and commodities).
Gold, as it often does, traded opposite the dollar today and is following through on that bearish setup I’ve been pointing out for a few weeks. Back in March I pointed out the forming double-top in the PowerShares Agriculture ETF, DBA (composed of Corn, Wheat, Soybeans and Sugar). It’s pretty much been trading in lockstep with gold since then.
The Nasdaq managed to close above its February high today. It’s not the most convincing move above resistance I’ve ever seen but the bulls will no doubt take it. And here’s something we haven’t seem much in the last 5 months — the 50-day moving average is actually headed higher. 
The S&P is still toying with that 1400 level.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Primary | Down | Down | Down |
| Intermediate | Up | Up | Up |
| Short-term | Up | Up | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
What’s your feel Mike? Is the bottom in or is this a bear market rally?
What do you think of DUG (oil short)? Chart looks interesting.
Excellent commentary, Mike. Thanks for the insight.
Your link to the Adam & Eve top is great too. I often look to Thomas Bulkowski for his take on chart patterns. I don’t know if you’ve explored his books or site, so I’ll pass it on: http://www.thepatternsite.com
I’m hoping this is the beginning of a good trend northward (indexes, dollar, etc.). But we all know that hope is a bad word, so I’m working hard to keep my emotions in check. I’ll be in all cash each night until the trend is a bit more established.
Hi Mike,
Consider this blanket thank you for all your excellent posts since I have wandered into the blogosphere.
I particularly enjoy your concise commentary and charts on the major averages — and it is a large part of why your site has been sitting toward the top of my blogroll for the last year plus.
Keep the good work coming!
-Bill
Greg — I honestly couldn’t say. If I had to choose, I’d go with a bear market rally simply b/c we’re still under the 200-day moving averages.
VC — DUG is still locked in a downtrend. I wouldn’t be a buyer right now.
Thanks JMJ and Bill!