Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Thursday, May 24, 2012

5/24/12 Dollar Continues To Rule

Stock Market Technical Analysis


Click on above image to enlarge

In last night's discussion of the markets, I emphasized how critical it was for the UUP (Dollar Index) to fall out of its uphill red channel that is shown in the top left chart and how traders would exit their new longs quickly if we stayed in or returned to that red channel.  The two large charts above are intraday charts showing 15 min bars of the UUP and below it 15 min bars of AAPL.  Looking at AAPL you can see how it climbed up into its last 15 min bar yesterday as the UUP came down and closed down on its lower red line in its last 15 min bar yesterday.  With today's opening 15 min bar you can see that the UUP actually did drop down out of the red channel for 15 minutes allowing for AAPL to gap up in its first 15 min bar but in the next bar the UUP turns and shoots back up into its red channel and you see an immediate drop in AAPL as it falls $10 over the next thirty minutes.  Things were improving for the markets as the UUP started drifting down in its fourth 15 min bar and drifted on back down out of the red channel allowing AAPL to climb from 565 back up to 572 but as you can see in the charts, the UUP reversed a second time mid morning and started climbing back up into the red channel which caused a sudden drop in AAPL (also marked with corresponding red marks).   Throughout the rest of the day the UUP continued to climb higher in its red channel causing AAPL continued to trade lower.  

In the last three 15 min bars of the day, we can see that the UUP set down on top of the upper line of the blue channel which is passing through its red channel right now.  It appears poised to lift from there to threaten havoc on AAPL and the market again tomorrow but if you notice below that AAPL also climbed in its last 15 min bar but that has to be disregarded as intraday only shorters covered in the last fifteen minutes and that is typical to a stock that has been trading down all day to move up in the last fifteen minutes as intraday only shorters cover their positions before the close.

In the chart to the right, we see that as I mentioned last night, AAPL closed yesterday above its blue 20 and pink 50 and then we see the gap open higher this morning but with the sell down today it closed down below the 20 and 50 again.  Not a good thing but the bulls can take a little bit of comfort that the low of the day did not pierce through 5 or 10 lines. 

In summary, the market is still selling down because of the rising UUP.  The lower line of its uphill red channel is a very thin line where the market will flip from buying to selling or vice versa in just a few minutes time as it did twice today, shown in AAPL.  Until we see the UUP convincingly lose its red channel, the market will continue to be a very unfriendly place.   The emphasis is on "convincingly" as everyone can see how the UUP dropped out of the channel on the 21st drawing people back into the stock market and then gapped open the next morning and raced back into its red channel tanking the market.  Nothing means nothing on bullish stock setups until this UUP run is over and the UUP is being driven by the worsening euro zone situation.

Alan