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11/24/2014 6:20:57 AM

Good morning Traders,

Friday's trade saw a potential reversal as prices gapped up and closed lower. So while they did break out to new highs, they also flashed a potential reversal pattern. Turn on futures this morning and we have bonds gapping lower. That will provide some push for stocks. And given the week, we'll start seeing lighter holiday trade. Bonds were looking to break higher, but the push lower this am means the bearish story will be on hold.

Over the weekend, I read a report talking about the move in oil denoting the weakness overseas. I'm more in the camp that it's all about the dollar. I wrote about it in our free weekly newsletter that comes out every weekend. If you're not a subscriber, click here and sign up. We provide more research there over the weekend with special offers on our other traders.

Here's what I mean regarding the dollar:

US Dollar versus QQQ

This level of the dollar is key. It's basically marked the top since 2006! So a break out here would be bearish for stock market. Right now it's advance is great if you travel overseas. But it's putting pressure on global economies. Thus the action they've taken over the past week - which our markets are perceiving as bullish for now.

Here's another view of the dollar's seasonality:

USD Seasonality

Here's the impact of the dollar on oil:

USO Seasonality

And finally, looking back at our popular cycle chart:

10/20/40 Week Cycles

So seasonally, the market tends to top this week and consolidate or move lower into the first week or two of December then peak into year end. Friday's trade set the stage for weakness, but we'll need a weaker close today to confirm the bearish signal of the market.

On Gold and Oil, we're closing in on a trade. I'm more bullish on oil and bearish on gold, but we'll need to see more evidence before taking positions. So stay tuned...

Regards,

 

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