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Tuesday, October 12, 2010

Raising Profit/Stop to 115.5, Watch the US. Dollar!

- This SPY rally continues to amaze, but I'm watching the US Dollar closely. The rally in the stock market coincided with the fall in the US Dollar, since September 1, as reflected by the prices of UUP (Power Shares DB US Dollar Index Bullish ETF). I'm noticing the lows in the UUP creep up for the past 3 consecutive days, indicating a good probability of a short-term dollar strength.
- If the US Dollar shows any strength, the stock market has high probability to undergoing a correction. My trading rules still tell me to be long the stock market, but I'm moving my profit/stop up to 115.5
- I also believe that SPY implied volatility and the VIX has fallen to a level where I would start to consider going long volatility. The FVE indicator is still below its moving average, however, so I would wait to go long volatility only if negative fundamental news comes out intraday.

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