Thursday, October 15, 2009

More Extensive Research

As I sit in my makeshift lab, the sun long gone and the children in bed, I have come to the conclusion that the most reasonable explanation for this insane (an inane!) increase in our beloved Stock Market is inversely related to the falling Dollar. But I AM biased: I stay emotionally bearish because I don't see or hear about any of the true problems getting fixed. All it seems is that the people with the ability are using this crisis as an opportunity to amass as much wealth and power toward themselves as fast as they can, while the chance is still there.

Whatever, there's nothing I can do as a debt-laden, middle-class serf. So I shall accept the situation and adapt by trying to ignore my emotions and rolling with the flow.

For charting & trading, I'm watching UUP, which tracks the Dollar Index (see DXY). And I've noticed that we are rather close to a strong low that was established almost 2 years ago, back when Countrywide and Lehman were names to be reckoned with.

Notice the long, orange support line extending from early 2008 to today.

Same chart zoomed-in to the present. There's that orange support line, and the Aftermarket trading just hit it! This should mean higher Index futures tomorrow morning.

Here's SPY, which follows the S&P 500. Looks like we have room for another gap-up in the morning. Last time we hit this resistance, you can see that we went flat for a week before bouncing back to the lower support. I don't see why we can't do that again.

This chart got a little busy, hence the extra colors. I anticipate that we'll keep the uptrend until the second week of December. That might also correspond with UUP hitting around 21.85, which could happen since SPY:UUP doesn't move with a 1:1 relationship.

In the short-term, I see a very bullish opening tomorrow, with a possible doji day. Next week will be flat, followed by some consolidation down to about 1050 S&P. And then the final push to the finish line in December. After that, who knows? Also to note, UUP is showing a falling wedge, while SPY has a rising wedge. This rally has shown me that such patterns are almost useless, so make of it what you will.

On the other hand, I just do all this to try and get a big picture of the whole Market and its direction. For actual trading (simulated for now), I'm usually only looking at small-priced stocks with decent volume, scanning for breakout formations and positive trends. They are mostly moving independent of the S&P, and I'm using them purely for technical trading practice.

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