Breakout in the U.S. dollar

With growing anticipation that the 1st rate increase from the Fed is nearing, the U.S. dollar index broke out of a multi-month consolidation.

The Federal Reserve today hinted that a rate hike was "still on the table at its next meeting" in December.

Traders in response to the more positive tone from the Fed, pushed the dollar higher and out of the consolidation.

The expectation now is that the US$ will gradually advance and start another retest toward par.

Bottom line: The U.S. dollar index broke out of a consolidation that held it since March.

The probability is that the dollar will now advance toward the March high of $1.00 in the weeks to come.

It is important to note that a rising US$ makes commodities less attractive.

This Setup in Natural Gas Is Getting Even Better...

Folks continue to be bearish on natural gas...

 

Last week, I told you the National Oceanic and Atmospheric Administration (NOAA) is predicting a mild winter this year. A warm winter would mean less natural gas consumption.

 

Now, the U.S. Energy Information Administration (EIA) is saying that household natural gas heating bills will fall by 10% this winter.

 

I disagree...

 

Part of the EIA's forecast is based on NOAA's winter prediction. But as I told you last week, I give premium weather service WeatherBELL Analytics' models more credence. The meteorologists at WeatherBELL are predicting a major cold and snowy winter over the South and into the East. And that winter will get a lot worse after December and run late through March.  (more)

Valeant Pharmaceuticals Intl Inc (NYSE: $VRX) near a bottom?

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) This is a stock that could head higher from Wednesday's close. VRX is in the process of bottoming and I expect a pop above $122 very soon. The A/D indicator on chart shows the strength of conviction behind this short-term bullish trend. On radar.

Wyndham Worldwide Corporation (NYSE: WYN)

Wyndham Worldwide Corporation provides hospitality services and products to individual consumers and business customers worldwide. It operates three in segments: Lodging, Vacation Exchange, and Rentals, and Vacation Ownership. The Lodging segment franchises hotels in the upscale, upper midscale, midscale, economy, and extended stay segments, as well as provides property management services for full-service and select limited-service hotels. The Vacation Exchange and Rentals segment provides vacation exchange services and products to owners of intervals of vacation ownership interests (VOIs); and markets vacation rental properties on behalf of independent owners. The Vacation Ownership segment develops, markets, and sells VOIs to individual consumers; and provides consumer financing in connection with the sale of VOIs, as well as offers property management services at resorts.
Take a look at the 1-year chart of Wyndham (NYSE: WYM) below with added notations:

WYN has been declining ever since it’s beginning of March peak near $93. However, over the past two months the stock had fallen into a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
WYN’s rectangle pattern had formed a $80 resistance (green) and a $70 support (blue). At some point the stock had to break one of those two levels, and last yesterday WYN broke the $80 resistance.

The Tale of the Tape: WYN broke out of its rectangle pattern. The ideal long opportunity would be on a pullback down to the $80 level with a stop placed below it. A break back below $80 could negate the forecast for a move higher.

Latest Margin Debt Figures Send An Ominous Signal For Stocks

by Jesse Felder, The Felder Report
The NYSE margin debt numbers for the month of September were released today revealing a very significant milestone for the stock market. As of the end of September, both stocks and margin debt have seen their 12-month rate of change turn negative after margin debt-to-GDP had risen above 2.5%. The last time this happened was April of 2008, as the stock market crash during the financial crisis was just getting started. The time before that was December, 2000, the very beginning of the dotcom bust.  (more)

$XHB SPDR S&P Homebuilders (ETF) on the Verge of a Death Cross

SPDR S&P Homebuilders (ETF) (XHB) — This ETF tracks the S&P Homebuilders Select Industry Index. The top 10 holdings in XHB are Helen of Troy Limited (HELE), Williams-Sonoma, Inc. (WSM), Lowe’s Companies, Inc. (LOW), Home Depot Inc (HD), NVR, Inc. (NVR), Allegion PLC, A. O. Smith Corp (AOS), Aaron’s, Inc. (AAN), D.R. Horton, Inc. (DHI) and Restoration Hardware Holdings Inc (RH).
I last recommended XHB as the Trade of the Day for participation in the homebuilding industry on July 10. At the time, the fundamental and technical picture for the group appeared bright, and I said: “This is not a trading recommendation; however, for investors seeking representation in the homebuilder group, XHB is an excellent and relatively inexpensive method of producing solid long-term gains.”

Now, however, labor shortages, higher prices for homes and falling revenues of suppliers have put a price lid on companies in the industry and the homebuilding ETF.

XHB topped on Aug. 19, above $39, but within three days, the ETF days fell to a low under $32. Rather than rebounding and establishing an uptrend, XHB formed a right triangle with bearish implications.

Selling has consistently outpaced buying volume, and the 50-day moving average is just a fraction from crossing through the 200-day moving average, which would result in a death cross — a long-term bearish signal.

Long-term investors who own XHB may want to continue to hold for a recovery in a year or so. But others should sell shares at the market price. Traders should consider buying put options on XHB.

Vera Bradley, Inc. (NASDAQ: $VRA)

Vera Bradley, Inc., together with its subsidiaries, designs, manufactures, and sells handbags, accessories, and luggage and travel items for women of all ages under the Vera Bradley brand. The company offers totes, crossbodies, satchels, clutches, and backpacks bags, as well as baby bags and lunch bags; accessories, such as wallets, wristlets, eyeglass cases, jewelry, and scarves; and travel products comprising rolling luggage, cosmetics, and travel and packing accessories, as well as travel bags consisting of duffel and weekend bags. It also provides home products, including mugs and tumblers, as well as textiles products, such as aprons, beach towels, throw blankets, and comforters; offers apparel/footwear, stationery, merchandising, and gift card products; and licenses its products. The company sells its products through two segments, Direct and Indirect.
Take a look at the 1-year chart of Vera (NASDAQ: VRA) below with my added notations:

VRA has formed a key support level at $12 (green) over the past two months, which had also been a prior resistance back in July. In addition, the stock is declining against a short-term, down trending resistance level (red). These two levels combined have VRA stuck within a common chart pattern known as a descending triangle. Eventually, the stock will have to break one of those two levels.

The Tale of the Tape: VRA is sitting within its triangle pattern. A short trade could be made on a break of support or on a rally up to resistance. A long trade could be made at support or on a break through the triangle resistance.