Market Update

Tuesday 10-19-10

Dollar Rally

The dollar gapped up almost 2% today, causing the inevitable correction in stocks, commodities, and especially gold. As mentioned for weeks now, gold was overbought and due for a pull-back; just as the dollar has been oversold and due for a rally.

The daily chart (UUP) shows the dollar has been oversold for weeks, with RSI well below the 30 level. Today's rally came on expanding volume and MACD made a positive crossover.

Overlaid on the chart are a set of Fibonacci retracement levels that give some upside targets. Notice that RSI has broken above its descending trend line.

With the dollar rallying, gold finally succumbed to its overbought condition. RSI has been well above 70 for almost two months now. MACD put in a negative crossover today.

Overlaid on the chart is a set of Fibonacci retracement levels that provide various support levels. This pull-back has been expected and should offer a good buying opportunity once support is found.

With gold and the stock market moving down today, the miners (GDX) took a hit as well, falling 4.60%. Once again - RSI has been overbought for weeks and has now broken down.

MACD put in a negative crossover and the histograms turned down as well. The various Fibonacci retracement levels offer support. The 38.2% level (54.27) held today. If it is breached, the next level to watch is the 50% zone near 52.85.

Good Luck. Good Trading. Good Health. And that's a Wrap.

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