Dollar Is Saying That Stocks Are Likely to Pull Back
The question is, are we in the middle of a trend reversal back up, or is this just a bounce within a down trend?
Trading with the trend is not always an easy task. It is human nature to predict and jump to conclusions, and usually it's better to trade with the trend no matter what your emotions are telling you. The current trend is down, and I stick with that until we are proven wrong.
If you carefully analyze the chart below you will understand where we are trading in the market and what the risks are at this point. The question is, are we in the middle of a trend reversal back up, or is this just a bounce within a down trend? Either way, any pullback this week should be aggressively managed to lock in gains and tighten stops because it could go either way and you do not want to be on the wrong side of the table.
The chart below shows the US Dollar Index 4-hour chart. It looks as though we should start to see a bounce this week and that should put pressure on stocks and commodities.
The S&P 500, SPDR S&P 500 ETF Trust (NYSEARCA:SPY), below shows my analysis and key price levels. I took a short position on the SPY Friday afternoon as I feel a pullback is imminent. That being said, all I need is one big down day and I will be pulling money off the table to lock in gains and tighten my stop.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
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