Markets mixed to higher, Dollar rallies

indexes0425.pngThe weekend seems to get away from me, and for some reason I seem to find any excuse to not spend much time on my computer. I updated my commitment of trader files and since have tried to think of other things. But it is Sunday evening and I must try to get some perspective on the upcoming week. Regrading stock indexes, I’ve been cautious of this rally. I thought the gap up would be tested, which it was. I expected the test to fail, which it hasn’t so far. So I was half right. The low volume, and continuing low volume makes me wonder if this will still try for a retest of the lower end of the moving averages. Being in new recent high territory should be attracting move volume. Both the QQQQ and SPY did try to test to support at the three day pivot (the yellow dots on the chart) and so far that area in both indexes shut off selling and buyers came, with the S&P/SPY closing near the high of the range, just slightly above the open. The candle left looks almost like a hanging man, which would be somewhat bearish. I put little faith in the candle patterns. I really don’t know why I even use candles rather than bar charts. Just habit I suppose. The Nasdaq/QQQQ chart also held the three day pivot, with a slightly lower close and leaving a small upthrust bar from the previous day. I didn’t include the momentum oscillator, but is is overbought on both markets, but the newly upturned trend indicators are both nicely up, and overbought isn’t too much of a worry when the trend is young. I still would like to see a retracement back to the moving average lines on light volume, and then a re-test back up on heavier volume. That would strengthen the bull case for me. Until I see that, or some sign of conviction on the upside, I will remain cautiously bullish with my finger on the sell button.
weeklyspy0425.pngAnother potential problem on a longer term basis can be seen on the weekly chart. To the right you will see the weekly chart of the S&P500/SPY. The downtrend on the longer term is still intact, and the momentum indicator is now overbought. Price is testing the upper moving average line with momentum still uptrending, even though over-bought. Price could easily clear the upside, as it has started to do on the Nasdaq. If this market should fail here there could be a nasty impulse move to the downside. I’m not expecting that to happen. I’m just trying to look at both sides and try to be prepared for whatever happens. Again, it is just weighing the evidence and trying to figure out the odds. It is never 100% one way or the other.
euro0425.pngThe chart to the left is the daily Euro Currency (the very last bar to the right is the Sunday night session). You can see the impulse move up on the left hand side of the chart showed a nice, smooth, easy uptrend. Then after the retracement in the middle of the chart, right to the lower moving average I might add, the subsequent uptrend became quite choppy and tentative. Divergence set in right at the top and for the first time in several weeks the price has actually closed under the moving average. The moving average lines are starting to come together. Momentum is getting very short term over-sold. It appears that the dollar is finally making a turn-around. If these moving averages can turn down, then rallies could be good short opportunities. I would look for rallies back up to the moving average area, accompanied by overbought reading in a short term momentum indicator, such as the double stochastic shown here, or any number of other indicators. The double stochastic has the advantage of reaching a counter-trend overbought or oversold level very quickly, while other indicators such as regular stochastics, rsi, or cci can stay at one extreme for an extended period, especially when a trend is new.