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Dollar Index Shows Pivotal Point for Stocks

NEW YORK ( -- The stock market is at a very critical pivot point that I feel will generate opportunities in December and for the first quarter of 2013.

Trading with the trend is not always an easy task. It is human nature to predict and jump to conclusions. 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 charts below you will understand where we are trading in the market and what the risks are at this point. The question is, are in the middle of a trend reversal back up, or is this just a bounce within a downtrend?

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 U.S. dollar index four-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 SPDR S&P 500 ETF (SPY) below that 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.

If you want a detailed educational lesson on stock market cycles, read my mini course here .

My trading charts make reading the market simple, quick and precise so if you want this type of analysis and trade ideas delivered to your inbox every day including my pre-market video analysis, join my newsletter here .

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Chris Vermeulen is founder of the popular trading sites and There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.

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