UUP/$USD Update

Since we have some movement in UUP, I think it's time for an update.

You may recall UUP was under some heavy accumulation last week.

 UUP 1 min shows us a bad opening for UUP on the 1 min chart, it opened negatively divergent and has already seen some downside this a.m.

 The 5 min chart shows this to be a more serious problem then just a negative divergence on a 1 min chart.

 As does the 10 min chart

And the 15 min, you can see last week's accumulation as well.

 The 30 min chart suggests UUP will see continued accumulation for what will probably be a large move up in the $USD

 The 60 min chart suggests the same.

Remember that UUP has an inverse relationship with the market and most asset classes, it would make sense to see some strength in the market while UUP returns to the lower range to go through a second round of accumulation. A failure in the market, could then send UUP higher on what would likely be a decent move up over a period of weeks.

UUP /$USD Chart Request.

Since the Dollar Index doesn't give us real time data to analyze multiple intraday timeframes, UUP has served well as a proxy for the D.I.  There are a couple of lessons that I have mentioned repeatedly about how the market works with regard to reversals and a good timing indicator, you'll see that in the UUP charts. I'll start from the daily (most important timeframe) and work down with the 3C charts.

 UUP daily 3C - In early 2011 we had a Stochastics negative divergence, which is one of two ways I find Stochastics useful. In January UUP made a false breakout above the short red trendline, which represented new highs, 3C did not make a new high with price so we had a negative divergence or distribution in UUP. As usual, the false breakout is an excellent timing indicator for a reversal and that was the ultimate final reversal in UUP . While 3C daily is the most important timeframe, it is the slowest to respond to divergences, it is worth noting though that we have another Stochastics and RSI positive divergence.

 The 60 minute chart gives us some more detail, in late March during a brief counter trend move, we had another false breakout in the little white box to the left of the chart. It didn't make a big breakout, but retail traders insistence on viewing support and resistance as EXACT levels to the penny, make a breakout of a few cents worthwhile for Wall Street. The same thing happened on another counter trend bounce in April, again n the small white box with the red trendline representing resistance. Once again 3C did not make a higher high with price and we had another negative divergence. In May there was a very brief accumulation period and once again, a false breakdown below the red trendline that started the move up. As you can see, these false breaks are excellent timing indications. Note also 3C made a higher high as the breakdown made a lower low-a positive divergence, the stops that were hit during that breakdown were accumulated and UUP moved up from there. Later in May, you guessed it, another false breakout above the red trendline (in the white box) while 3C made a significant lower low, this was distribution and UUP tumbled promptly from there. Recently during June, we've seen a 60 min. positive divergence at the white arrow, I believe this will end up being a bigger divergence, meaning I think there' more accumulation to come.

 The 30 min chart confirms the charts above, with some more detail. That false breakout later in May is quite visible, as is the negative divergence (red arrow). Note distribution had started before that, it takes some time to distribute an accumulated position, but the false breakout was an excellent timing indication of the end of distribution. Note again in June, the positive divergence forming.

 The 15 min 3C chart- a closer look at the May false breakout and the current positive divergence. The part in the large white box is a leading positive divergence and the most powerful type of divergence. It is making new highs on this chart, despite prices being near the lows.

 The 10 min chart simple shows the range in which accumulation is taking place, Every time UUP moves up too high in the range, a negative divergence sends it lower where it is accumulated. There was a negative divergence end of day 6/6 which sent UUP lower on 6/7, today there was another negative divergence in the same price area. It seems whoever is doing the buying (and John Taylor openly admits he' accumulating the dollar), they are pretty specific about where they want to average their position and it seems to be around $21.

 The 5 min chart just confirms what we see on the 10 min in more detail.

 And today's 1 min chart. Note there was good confirmation (green arrows_ with higher highs in price and 3C until the last two hours of the day as we approached that $21.15 level

Looking at the range, it seems for whatever reason, accumulation is pretty low in the range. Big orders are often routed through market makers, in this case a specialist and they often have a specific target they want to accumulate at. So the specialist will knock prices down to fill the order at the customers target range. If they don't, it's unlikely they'll be getting repeat business. I don't know why they are so specific about such a minuscule difference, but they appear to be. As far as how long this accumulation may go on, we have no idea of how big the order was and at what average price so it's hard to say when this will hit mark up, but as usual, look for a false breakdown below a well defined support level as a timing trigger to launch the dollar into mark up.

While as a general rule of thumb, there tends to be an inverse relationship between the dollar and commodities/precious metals/equities, I've noticed that relationship is not as consistent as it has been in the past. of course there are a number of reasons that are outside of the dollar inverse relationship that could be influencing this such as surprise news and statements out of the EU, specifically with regard to Greece, also margin hikes and the recent margin discount of ES (which was strange as it was in the face of rising volatility. In any case, an inverse relationship between the dollar and the above mentioned assets cannot be counted on as reliably as in the past. This seems to work to the benefit of our Miners trading system.

I'll update precious metals in the morning, but generally my recent view has been to look for a deep correction in gold (perhaps that 2 time in a year buying opportunity at the 150 day moving average)  and even though silver is trading at a deep discount to the historical ratio between gold and silver, it seems they are out to get silver. Whether this is in support of whatever may be left of JPM's short on silver or has to do with something altogether different, I don't know, but considering the deep discount silver was trading at, the 5 consecutive margin hikes out of the CME were well designed to halt the rally in silver. The CME's volatility explanation was weak when they published it, it was even weaker when they dropped margin requirements on E-minis in the face of rising volatility, expressly contradicting their margin/volatility paper released after they were widely accused of manipulating the price of silver through a seemingly unreasonable amount of margin hikes (5 in all and 1 about every 2 days on average until the silver rally was stopped in its tracks). For that reason, I'm a bit bearish on silver as the COMEX/CME seems to be taking orders from higher ups-perhaps the treasury or the Fed and those are two entities I'd rather not go up against at this point.

Dollar Chart Request

I just explained a theory regarding the market and the dollar to a member who emailed me. As you know, I've expected a shakeout move to the upside, around SPY $135+. The market doesn't look good at all when we view the macro trend as I showed you last night, but tops take awhile to set up and one of the best indications of a market that is really ready to break down is when a false breakout occurs. We have seen this time and time again whether it be an intraday move, a swing move or a major top. As unlikely as that may seem given the market's nasty tone this week, I think the possibility is still there, especially given the charts I just showed you of the market's leveraged ETFs.

Generally speaking, for the market to have a bullish tone, the environment in the dollar needs to be weak as there's an inverse relationship between the two. I have speculated several times this week that the dollar is under accumulation, that typically occurs with falling prices or within a trading range or both. So if I continue down this path, which is some what speculative, accumulatio in the dollar should provide an accomdative environment for the market to move higher. The point of the market moving higher, especially if it were to make breakout highs, is to set up a bulltrap/false breakout. With a large accumulated position in the dollar, once it starts moving up into stage 2 "mark up", the environment for stocks becomes bearish. If these two events coincide with each other, there is th possibility that my original thesis will occur. The longer the dollar accumulates, the bigger the move up in the dollar and the more bearish the environment for stocks (in my speculation, the start of the move up in the dollar would coincide with the breakdown in the market).

Thus far the action in the dollar i supportive of that theory.

Here's UUP which is the proxy I use for the Dollar Index being I can't get intraday information on the actual dollar index, but UUP seems to work fine.

 This is an hourly chart of UUP, I know it looks confusing, but stay with me. During late April/early May, there was an accumulation period in UUP or the dollar, it lasted 5 days. Currently at the white arrow there is another similar positive divergence/accumulation which thus far has lasted 4 days. In early May, after accumulation was completed (and please note that it started into falling prices and then settled into a range) the "mark-up period began in which the dollar moved higher. In red, you can see where distribution began. It's important to remember that the position accumulated over 5 days is pretty big, it can't be sold all at once without sending the dollar much lower as supply would overwhelm demand. However, also take note that distribution did not begin until AFTER UUP had moved up beyond the accumulation zone, so in effect, distribution didn't begin until the position was already at a profit.  5-days of accumulation produced 13 days of rally in the dollar.  There were 5 days of rally before distribution even began. It appears that the positive divergence in UUP is still in the early stages, accumulating into falling prices. That suggests that this accumulation period may be much larger the the April/May period, producing a larger move in the dollar and putting more pressure on stocks.

This is a 30 min chart of UUP confirming about 4 days of accumulation thus far. The Greek situation, being as fluid as it is, could further influence the outcome in the dollar as the dollar will likely fall upon a resolution of the Greek debt deal. I don't think that is something the market can accurately discount so we may have a surprise in the mix.

Here's the last chart showing the inverse relationship that is common between the dollar and equities.

The S&P-500 is in red (click on the chart to enlarge), the Dollar via UUP i in green. Note that the S&P hit its highs at the bottom of the dollar accumulation period in early May. Once the dollar started moving up, the S&P started trending down.

It seems there's still a possibility that the original scenario I had envisioned can still play out.

SPECULATIVE CURRENCY TRADES-UUP/FXE

Recently we've been watching for a possible false break in FXE and UUP, it appears we have that. With both trades in the position they are at, the trade makes sense as the risk is limited.

 FXE seems to have hit a double top with two false breakouts.


 FXE 15 min chart suggesting a reversal

 FXE's 5 min chart suggests it's ready to go. Below is an indicator I rarely use, it gives signals when there are extreme conditions and right now, it's very negative.

My stop for FXE would be $141.85

UUP

 Here's the possible False breakout in UUP

 UUP's  15 min chart suggesting a reversal-the volume seems to have accomplished what a false breakdown is meant to accomplish, knock traders out of their positions.

UUP 1 min seems it's ready to move up.

My stop on UUP would be $21.60

UUP/$USD Follow Up

In reent posts, I've been talking about the divergence between price in UUP (proxy for the Dollar Index) and 3C, which have shown strength. As is almost always the case, UUP broke below an obvious support level at May/June and as is usually the case with these types of breaks (especially with positive 3C), the breakdown was accumulated only to see UUP shoot right back through resistance the next day. 

Here are the updated UUP 3C charts for today, there are some minor changes.

 1 min 3C showing accumulation of the break below support, also note that we have a negative divergence on this morning's gap up.

 The 15 min chart shows a bit more history and the importance of the positive divergence in UUP, however it too is already showing a negative divergence on the gap up this morning, to be found on a 15 min chart so quickly hints that there's been some decent distribution in to the gap up.

 The 30 min chart shows more history of the divergence and also a slight negative today.

And the 60 min remans very strong. I suspect UUP will pullback which will have effects on correlated assets, but considering the longer view, I think there's something bigger brewing in the $USD/Dollar index that will play out soon.

UUP Follow Up

Yesterday I posted two updates on UUP (as a proxy for the Dollar Index being there's no real tme data for 3C on the actual Dollar Index). Both posts concluded UUP/$USD was preparing to decline.

Post 1

Post 2

Here's UUP this morning...

We'll see if the chart below takes UUP lower as it suggests.

30 min negative divergence, would suggest lower prices for UUP over the coming days.

Chart Requests-GDX, SLV, NEM, UUP

Many, many charts ahead! 

GDX

 GDX showing heavy volume on a 13.58% decline puts GDX in an oversold condition.

 GDX 60 min 3C chart showing the negative divergence at the top, it broke support and seems to have broken down out of a topping formation. Corrections right after such a break often will test resistance which is around $57.50-$58.25. The white arrow shows the positive divergence that has developed for the correction. There seems to enough accumulation there to provide a pretty decent corrective run up.


 a 10 min chart gives us a closer look at the accumulation which often occurs at price lows. 3C is also showing confirmation of the trend on this chart indicating that no major distribution has occurred yet.

 Here's the stop I would use if I was in a trending trade, a little north of $60

For those looking for a tighter stop, the $58 level is another trend channel stop. I think if you go much tighter you might as well just stop out here and now and re-enter the trade upon a reversal/distribution.

NEM

 NEM has clearly broken down from a top congestion pattern. Volume has been heavy and it too is in an oversold condition. Note my long version MACD is negatively divergent as well.

 NEM 30 min 3C. Distribution at the highs, there's some accumulation recently leading to this move up.

 Nem 1 min shows mostly confirmation of the trend with some afternoon profit taking

 I'd probably use a stop in the $60+ area as this has enough accumulation to run a bit higher.

15 min chart isn't showing any heavy accumulation so this is most probably an oversold bounce.

SLV

 SLV has declined 13% and is oversold and due for a correction. Again we see distribution as price highs, this is likely a midterm-maybe long term top. MACD is also divergent.

SLV shows a false breakout in the yellow box-as usual with false breakouts, the reaction was a sharp downturn. Yesterday put in a doji which is a high probability reversal candle as downside momentum fades leaving the door open for the bulls to take control.

 The daily 3C chart especially highlights the false breakout and the negative divergence associated with it. This is an area in which institutional money went short.

 the 60 min. chart confirms the false breakout as well and shows recent accumulation for a correction. Like I said above, these events are planned, not spontaneous.

 The 15 min SLV chart shows a decent amount of accumulation, it's likely this move s just getting started.

 More confirmation on the 10 min chart.

 more confirmation on the 5 min chart.

 The 1 minute chart shows confirmation of the trend, there's no real distribution to speak of except some late day profit taking.

Here's a recommended stop around $28.75. You may wish to raise it a bit.

UUP

 UUP is putting in a star (reversal candle) on increasing volume (increases the chance of a successful reversal.


 The daily chart has remained fairly positive despite the price trend. UUP will move because of the EUR/USD pair, but the actual ETF's accumulation or distribution is determined by market participants.

 UUP hourly positive divergence


 UUP 30 minute positive divergence

15 minute positive divergence of some consequence

Here's the bigger pattern, a bullish descending wedge and some base work. A breakout around $23.50 should start a trend up, in the meantime there's some support in the $22.25 area.