Watch This Inverse Relationship
Patience is a virtue,
especially in trading. What started off as yet another pathetic
morning of trading — see 5-minute S&P chart below — turned into a window of
opportunity if you were paying attention. The cause? The fall in the
Dollar Index (DXC).
Not only is there no range,
each bar engulfs the other one, making the “chop” factor unbearable. Luckily
the DXC
gave way.
Most know that there is a typically an inverse
relationship between the DXC and the gold
mining shares. Secondly, as noted in yesterday’s column,
Newmont (NEM), after being beaten up badly in recent sessions was
showing good support around the 39 level.
These two observations were enough reasons to be
long NEM but also to look at going long
currencies like the Euro (EUR) as it
typically trades counter the DXC on extreme
price movement.
It appears that the S&P’s, as of 5:15 AM PST are
under pressure again, hovering just above the 1000 level. I cannot stress how
important it is to take advantage of any price movement in the opening hour, the
afternoons continue to be sideways and choppy. I will continue to focus
primarily on the gold stocks as they continue to offer decent range and
liquidity.
On a side note from a longer-term perspective
keep an eye on the Australian Dollar (AUD).
The AUD continues to flirt with new highs,
.6845, and with persistent dollar weakness and the strength of the Australian
economy and the possibility of higher rates in the near term it seems like a
reasonable long.
I put on small position last night at .6805 and
will add on a break to new highs. A move in the long run to .71 is not out of
the question. Use a stop loss around .6680 or .66 if you are willing to use a
wider stop loss.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
|||||||||||||||||
|
As always, feel free to send me your comments or
questions.