It's a schizophrenic stock market. The trend shifts from bullish to bearish to bullish and then back to bearish – all within just a few days. My personal perspective is changing just as fast. I was buying in October... selling last week... and now I'm buying again. Here's why...
This is a chart of the U.S. dollar. The greenback is tracing out a "bearish rising-wedge" pattern similar to what we saw in August and September – just before the dollar collapsed 6% in one month. For most of this year, the dollar has traded opposite of everything else. When the dollar rallies, everything else falls. When the dollar falls, everything else rallies. A falling dollar has been bullish for the stock market. In fact, when the dollar broke to the downside of its rising-wedge pattern in early October, the S&P 500 exploded 16% higher in just four weeks. There's still room inside the current "rising-wedge" pattern for the dollar to push higher one more time. But after that, the rally is over. If the dollar falls like it did in October, the rally in the stock market should be sudden and severe. Of course, it's hard to go from bearish to bullish after only one week. But the circumstances are changing fast. Good traders need to change direction just as quickly.
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