Monday, May 2, 2011

Stocks Keep Rising as Dollar Dips Prepare to take profits soon as sell signals gather

In recent years the equity and commodities markets have been controlled by the U.S. Dollar, though the relationship is an inverse one. That is, when the dollar rises, equities and commodities drop, and when the dollar falls, the two go up.

It appeared earlier this week that the equities market had a lot of strength and it looks as though it still has more power behind it.

Dollar Index
On Wednesday the U.S. Dollar went into a free fall, blowing through my downside price target of $73.30. It was this sharp drop in the Dollar which sent stocks, silver and gold soaring higher yet again in our favor.

Equities Market – SPDR S&P 500 (NYSE: SPY)
Before that sell off in the dollar, I did see fear creep into the market as traders started selling their shares and buying put options expecting the stock market to fall. When I saw this I got excited because it meant higher stock prices were just around the corner. That’s just what happened and that’s when I sent an update out to subscribers noting we should see some fireworks very soon.

While I am bullish on the stocks and metals at the moment and long in several positions I am starting to see signs that a pullback is becoming more likely each trading session. This is when money management is important. I do not want to give back too much profit, but I must make sure we lock in some gains during times when the market is overbought like this.

We continue to ride the trend of higher stock and precious metal prices as the U.S. Dollar spirals down. Our S&P 500 positions are deep in the money and we continue to ride it for all it’s worth, raising our stops as we go.

The big question is if the “Sell in May and Go Away” axiom will take shape or not. I’m thinking it will as when the time is right I will be looking to short the market.

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