It's been a wild ride the past few days with options expiration, and comments from President Obama and the
Federal Open Market Committee
on the U.S. economy. It seems like everyone is waiting to see what the market is going to do.
Since the market topped in April and has since been trading sideways in a rather large range, everyone has small positions at work but are waiting for a decisive move before fully committing to one side. There could be a few opportunities in the coming days using bonds, the dollar and the
if all goes well.
Let's take a look at the charts.
S&P 500 -- SPY ETF, Daily Chart
There has been a lot of talk about a sharp rally if the S&P 500 could break the 1130 level or neckline everyone is talking about. Well, this week Obama was on TV and the market rallied into that, then again after that. I don't really think investors or traders were buying things up as he said the same boring stuff he always says.
Anyway, the market pierced those resistance levels and I'm sure a ton of traders have switched their view on the market to bullish from bearish. While I prefer to trade with the trend I can't help but feel this market is still rangebound which is why I am still bearish at these shakeout levels. The S&P 500 did break resistance but the candle on the chart didn't close above the breakout candles high to confirm the move.
That said, the market is now trading back down at support and the next couple of days I'm sure will shed some light on the direction.
20-Year Bonds -- TLT Fund, Daily Chart
We have seen the bond price pull back in a bull flag formation. It touched support before bouncing to break short-term resistance as it looks to have started another rally. The chart overlays both the candlesticks of the bond price and the S&P 500, which is the white line. You will notice they have an inverse relationship. If bond prices continue to rally then the S&P 500 could start to roll over.
U.S. Dollar -- UUP Fund, Daily Chart
The dollar has fallen sharply the past 10 trading sessions and it looks to be oversold for a couple reasons. The past couple of days the price has dropped straight down and gapped lower. This recent drop has reached a gap window which will act as support and could provide a tradable bounce in the coming days depending how things unfold.
The S&P 500 is flirting with resistance and has yet to confirm the breakout. Bond prices look to be headed higher which makes me think equities could start to sell off any day now.
It's also important to note that the shares of big banks like
have been under pressure and they tend to lead the broad market. Another point to add is the fact that oil has not rallied even though the dollar dropped like a rock. What happens if the dollar bounces? Could oil finally start its next leg down?
Gold and silver continue their steady grind up. The price action reminds me of the move in November-December 2009. Once that train derails it's going to have a sharp correction.
Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. 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.