Dollar Support May Give The Market a Breather

In this weekend’s video, we take a look at the S&P500 SPY and its relationship with the US dollar UUP. The SPY finally tagged the 137.20 level intraday which is where the 2011 highs are. The UUP is nearing the 200 day moving average where it should find some near term support or even a bounce. Since the market and the dollar are inversely correlated, a bounce in the dollar should have the market pullback.

If the elusive pullback does happen, we are looking at some setups in IBM, GS, and DIS for next week.

Video Transcription:

Hey, this video is for Friday, February 24^th 2012. I wanted to give a few pullback names to possibly get into long with some call options next week.

First lets look at the SPY. You can see that we reached the 137.20 level intraday today. We pulled back slightly and the previous level on this was 137.18. Obviously we were expecting a pullback as I’ve talked about on the last video. I also talk about how we have to be patient and how I was positioning for this for the short side.

The Dollar and the Market:

Another thing that is interesting here is the UUP, the dollar.

You can see that the dollar continues to fall. As the dollar is falling the market typically rallies and that has not been happening this past week. You can see the dollar fell 3 out of the 5 trading days this week as the market fell. So you can see that the dollar has now broken this low and we are now down at the 200-day moving average. This should provide a little support for the dollar if not a bounce and that is my concern for the market because if the SPY cant seem to make new highs while the dollar is making new lows and then the dollar were to rally then I think a pullback would probably happen.

We’ll see how it plays out next week. Again we are consolidating up at the highs sort of this little mini-double top if this thing comes down. I’m not expecting a big crash but maybe a move to the 20-day or possibly this small gap fill around the 133-132 level.

Ideas on a Pullback (Goldman Sachs, Disney and IBM)

On a pullback though some names I’m interested in is Goldman Sachs (GS) in the financials. You can see Goldman has had trouble at the 118 level but now we are consolidating up there and we are also above the 200 day moving average with the 20-day moving average coming up so I think if you can get in around 114 with some call options I would look at April at this point and I would look at the 115 or 120 Call Options. I think if we can get above 118 you have a pretty clear shot at 125. So that is one long play.

Another one I’m looking at is Disney (DIS), which already broke this previous resistance around 41, and it is consolidating up here between this next level. If we get a pullback you can get back in at the 20-day moving average or maybe if you want to get aggressive at the 41 level look for a break of 42 I think you can get to the 43.25 level.

One more I’m looking at is IBM. IBM had a monster day yesterday and is now taking a little bit of a breather. IBM got right up near the 200, a big round number resistance. I think this consolidation around the 195 would be a good place to get long if we get a pullback. Again if you are looking for directional options I would probably start looking at April Options at this point since there is only about 20 days left in March Options, that way you can get a little more swing out of it.

That’s all I got for today, you guys have a great weekend and I’ll catch you later!