The next couple of days in the stock market could be on the quiet side. You see, the Federal Reserve is holding a two day FOMC meeting on Tuesday, and Wednesday. Many institutional traders are going to be on hold until they hear what the Federal Reserve Chairman Ben Bernanke says. As you know, most institutional traders and investors are just dying to hear the words quantitative easing three (QE-3). The likelihood of this happening this time around is very slim.
The Ben Bernanke's comments were just released before he testifies in front of a Joint Economic Committee. It should be noted that gold, silver, and gold mining stocks are declining lower. This tells us all that the Federal Reserve is not looking to implement another quantitative easing program at this time. ...
Divergences Appear: May Signal ECB Stimulus Coming Shortly
The market is showing positive divergences in two major areas. These areas signal stimulus and possible bank recapitalization from the European Union and the ECB. Ultimately, the markets are signaling something big on the horizon that could cause the market to pop sharply in the short run.
Positive Divergence: Dollar vs. Market Suggest Stock Rally Soon
By now everyone should know that when the U.S. Dollar Index is strong the major stock and commodity markets will deflate and trade lower. Most leading commodity stocks are falling sharply lower today as the U.S. Dollar Index futures surge higher. Traders can easily see how the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) is trading higher by 0.17 cents to 22.51 a share.
The PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) has a clear head and shoulders pattern on the daily chart. Head and shoulders patterns are bearish in nature and usually mean more downside for that particular chart. This pattern has triggered on the UUP which is the Dollar tracking ETF.
Nearly every trading session when the stock market is lower the U.S. Dollar Index is higher. Well, that is certainly the case once again today. This morning, the U.S. Dollar Index futures (DX-M2) are trading higher by 0.38 cents to $79.69 per contract. While 0.38 cents does not sound like much in the U.S. Dollar Index; it can move markets.
The most important chart that anyone can follow is a chart of the U.S. Dollar Index. The major stock indexes and most leading commodities will usually trade inverse to the world's reserve currency. For over ten years now the general stock market direction has moved opposite or inverse to the U.S. Dollar Index.
This morning, the U.S. Dollar Index topped out around 4:30 am EST. This was the same exact time that the S&P 500 Index e-mini futures (ES-M2) bottomed out. Traders can easily see how these two indexes continue to trade inverse to each other. When the U.S. Dollar is devalued it will inflate asset prices around the world. Traders can see how the large bank stocks are surging higher today.
The precious metals are taking another hard hit today as money is flowing out. Not only is the Dollar stronger but the risk on trade is all the rage. The PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP) is trading at $22.41, +0.11 (+0.49%). When traders and investors feel the economy is on the right path, there is no need to hold gold for safety.