Dow Down and Dollar Up

It's a bit counter intuitive, but it's what's happening right now. The best trade that I've seen lately is to short stock indexes and go long the dollar, particularly the Eur/Usd pair. The Eur/Usd has been trending nicely which has offered numerous opportunities to hop on board. Most recently, the rally to the 50 day moving average offered a great point to jump on board.

Judging by the above daily chart of the Eur/Usd, the rally in the dollar will likely stall soon. This happens; markets tend to snap back pretty quickly when they move as fast as they've been moving lately. I would at least wait for the price to fall back closer to the 10 day moving average (the aqua blue line) before taking a position.

As for the Dow, the chart pretty much says it all.

The Dow has blown through the short term support and looks to be in a free fall motion. Although it looks bad, and I will certainly be staying bearish for a while, the dow seems to be close to a bullish counter-trend rally. Take a look at the BB Width indicator at the bottom of the chart. It has moved all the way up to the 15 mark, which indicates that a near term bottom is either here or close. Notice that the last time the BB width was 15 was back in July.

Personally, I'll be looking for short-term counter rallies in order to load up on dollars and short stocks. The fed cutting rates at the up coming fed meeting would be an excellent catalyst to get a good counter trend rally which should provide some nice low risk entry opportunities. Good luck out there.

TLT