New Highs

q1001.pngThe stocks indexes were all up sharply today, with the Russell 2000 up the largest percentage. Volume was still fairly light. It was pretty much a one time frame up market for most of the session, with only a little rotation down in profit taking at the very end of the session. With the Dow making new all time highs, the continued perception of lower interest rates, the monthly seasonal expectation of money inflows, ignoring negative warnings by Citibank, and Crude Oil sharply lower, the market had reason to want to start the final quarter off with a blast. The upper graph on the chart to the left shows the QQQQ with the three day pivot. There have been minor divergences and overbought reading on some of the oscillators, but as long as that pivot is not taken out, I assume the market to continue higher, although a sharp pullback would not be unexpected. The lower sub-graph is the S&P spyder, showing the breakout of the pivot nine bars back. Both markets opened right on the three day pivot and had trend days up. You can see the QQQQ has had a much smoother trend up since the mid-August lows. A move in the next day or so under the three day pivot might signal a pause in this upmove, since most indicators are in overbought territory.
di1001.pngThe chart to the left is the continuous contract of the US Dollar Index going back to mid-June. You can see how well the three day pivot caught many of the swings, and the adaptive CCI at the plus or minus 200 level (the dark cyan line) suggested the area of possible trend reversal in each of the three prior occurrences. It has recently been hovering around the minus 200 level during the most recent decline triggered by the rate cut. There is a possible inverse head and shoulders pattern developing in the indicator, suggesting there might be some kind of recovery in the dollar. I’ve been expecting this since sentiment is very one sided against the dollar. Dollar bulls are very hard to find right now. The assumption is that the dollar will continue to decline with the expected upcoming rate cuts. I assume they expect the dollar to go down toward zero. That perception might be good for business on a very short term basis, but very bad for the country in the long run. If the dollar recovers watch out below for gold.

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