Stocks gain except Nasdaq, dollar up, gold and oil down

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Stock index gapped higher today on further hints of fed easing. Isn’t that already priced in? How much more hinting can there be? So interest rate cuts are almost certain at this point in both the funds rate and discount rate. All stock indexes gapped on the open but were unable to hold the gain in the case of the Qs, and lost some of the steam in the SPY and Dow. Some profit taking should not be a surprise after three up days. On the Nasdaq/QQQQ chart the pivot resistance point where the blue line is drawn was penetrated yesterday, and today the Qs gapped away from that line, but by the close the Qs pulled back under the line. The three day pivot was tested, but the Qs recovered a bit by the end of the session to close just under the resistance line. The S&P/SPY in the lower sub-graph also gapped away on the open, then rallied beyond the pivot resistance line, also drawn with a blue line on the chart, but failed to hold that breakout. The SPY still closed with a healthy gain for the day, but the day structure was not that positive. There were tails on both sides of the body of today’s candle, showing the market closed near where it opened, thus showing indecision and failure to follow through on the breakout.
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For another look at the S&P/SPY the chart to the right shows a view with a little more data showing the trends and momentum. The trend indicator is still indicating a downtrend but with prices over the top of the indicator. The was a nice bullish divergence indicating the possibility of this upmove, with a choppy saw tooth action in-between the divergence. The momentum indicator is now in overbought territory, but still climbing. Usually after a powerful bullish divergence and overbought reading is normal and doesn’t necessarily indicate a move back down. If momentum turns back down prior to the trend indicator crossing back up I’d be inclined to trade on the short side, especially since prices were unable to take out that pivot so far. It is always possible for a shallow retracement to occur, allowing the trend indicator to cross up and relieving the overbought reading. If that were to occur with a breakout of the pivot area, I’d be inclined to change to a bullish perspective. I better start looking for a bull graphic to put in the box in the upper left just in case this occurs.
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With interest rate cuts almost a certainty, especially with more remarks late Thursday by Uncle Ben, one would think the dollar would have started another leg down on its journey to oblivion. But it wasn’t to be. I’ve said here before that if news that should be bearish to the dollar resulted in an up-move, that maybe a low would be in place. The dollar made a nice advance today, following the increased chance of discount and fed rate cuts. It was up nearly 3/4%, with a corresponding drop in the Euro currency, with the Japanese Yen dropping more than 1%. You can see on the chart that prices on the continuous dollar index is very near the overhead resistance line drawn with the red line. The trend is still down as defined by the blue and cyan indicator lines, with price just over the top of the declining lines. The divergence between prices and the momentum indicator indicated a possible upmove. The indicator is not yet reading in the overbought area. If a change in trend does happen, it would be logical to assume some retesting, as many traders are still looking to sell rallies and not looking at the long side of this market. With sentiment as negative as it is in the dollar, a sharp up-move without the re-test is possible, but probably not probable. I always hate chasing markets and prefer to enter on re-tests, but I miss many moves waiting.
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The gold market was down today. Not too surprising with the rally in the dollar. I mentioned the upthrust here a couple days ago. I marked it with the magenta circle, as well as the previous cluster of upthrust bars a couple weeks previous. The upthrust was accompanied by a hook down with divergence pattern in the momentum indicator, although it wasn’t really a divergence against price as price failed to make a new high. The trend indicator is now ready to cross down, and the pivot support line in red is close to being taken out. This market looks very bearish. Crude oil was also down sharply today and some commentators said oil was the reason for the gold move. I don’t agree with that. The driver in my opinion is the dollar. Gold and oil are poorly correlated, although it is convenient to say one influences the other. In college logic we learned that if A=B and B=C therefore A=C. That might be logic, but in the world of trading logic can get you into much trouble. It might be more appropriate in market logic to state that if A=B and A=C don’t assume that B=C as they are only being influenced by A, therefore if B seem to equal C it is probably a coincidence (and don’t devise any trading systems based on the phantom correlation).