Stronger Dollar, weaker Stock Market

From March 09 till now, it is clear that Dollar has inverse relationship with stock market. As easy dollar is provided by the Fed, people use it to buy stock, gold, crude oil. So while the stock market, gold, crude oil go up together, dollar has been in downtrend.

Recently the dollar show some strength, as trader took profit and move position from stock,gold, crude oil to dollar cash.

As a result, the dollar go up and the others go down.

From the dollar chart, it show that the dollar price has been above MA 20, down retesting it and go up last friday. It will test whether it can break the downtrend line.

Stock market can only go up when there are buyers who willing to take higher price from seller.

Currently looks like big institution start to move the money out, as we can see from the dollar chart. As individual trader, we must becareful not to be trapped buying from big institution. Follow the big money, when they get out, why we should insist to stay? My prediction is dollar will be able to move above the resistance line and stock market can go down to 9200 for dow jones.

For option trader, we can start to buy put option to play this correction phase. Start small first and can add when get confirmation from dollar break above the resistance line.

Currently I play put option BAC and my position now is 50% profit.

SP500 has breach its important support while dow close on MA 50 support, not yet breach.

Weekly chart of Dow and SP500 also show bearish sign, while their monthly chart create doji pattern which show indecision between buyer and seller.

When market does not respond well on good economic news, we should be ready that the correction will continue. If you can not handle shorting or put position, better stay sideline until the market show some uptrend strength again.

Best regards

Snip