Technical Trades Of the Week – SPX, Dollar, Nat Gas

Wednesday’s price action was very bearish yet again and we are patiently waiting for a counter trend pullback to happen. While three are some good looking plays out there I really do not want to get long until the market clears the air with a bout or three of strong selling. Remember 3:4 stocks follow the market and the odds of picking a commodity or ETF that bucks the trend is unlikely. 

SP500 / Broad Stock Market:

We have seen a bug run up in stocks this month and things are looking a little long in the teeth. A large number of stocks are trading above their upper Bollinger band and the broad market is testing that key resistance level also. Typically when a Bollinger band is reached we see price reverse for a couple days at minimum.
While the equities market is in a new uptrend as seen by the moving averages I pullback seems imminient. The last two days has formed reversal candles and are pointing to lower prices.

Dollar Index Hourly Chart:

This chart shows a possible bottom forming in the dollar pointing to a 3-8 day pullback in stocks.

Gold Futures Hourly Chart:

Natural Gas Hourly Chart:

Morning Trading Conclusion:

Looking at the charts on several different time frames, not all shown here, technical analysis shows a pullback in stocks is highly likely. This is what we are currently positioned for.
The US dollars downward momentum is slowing and if it can find a bid today it should trigger strong selling in both stocks and commodities. Gold and silver are down sharply along with miners.
We have been watching natural gas for a few months and know that it has been trading inverse to what stocks do. This bodes well for a bounce in natural gas if stocks start a sell off. That being said, natural gas is trading at a key tipping point that could spark a very fast and hard drop. This knife can fall at a speed that will take a slice out of your trading account if not traded and managed properly (tiny position and use of a stop). I actually like natural gas the more it moves down and could issue a buy alert on it today or this week. I would like to see volume decline at this level showing the momentum is slowing…