Dollar Story (7): 5 Impulsive Waves Up

Dollar ETF UUP reached its low $22.26 on October 21, which is closer enough to my target price, 22.34 to 22.40, calculated in my blog on October 8, Dollar Story (5): We Are Close.

Since then UUP bounced up in a very clear 5 minuette impulsive waves, and is correcting in its minute wave [ii]. I have its larger degree wave count in previous post: Dollar Story (6): Bull Percentage Sentiments

I think in current market condition, the dollar is the only safe place to be bullish on. I am pretty much bearish on everything except the dollar.

Third Quarter GDP = 3.5% ?

Yesterday's headline news:"Real gross domestic product increased at an annual rate of 3.5% in the third quarter of 2009"

Wow, not bad. Hold on, wait a second ......

"Motor vehicle output added 1.66 percentage points"

That is "cash for clunkers", isn't it?

"Real federal government consumption expenditures and gross investment increased 7.9%"

OK, here comes the simple math:
3.5% - 1.66% - (7.9% * 30%) = -0.53%

Game Over? (5): Topped Secondary Indexes

I put six indexes in above chart, as well as the US dollar index and Gold. Today Dow closed under 20 DMA but above 50 DMA. However all the other indexes closed under both 20 DMA and 50 DMA, the blue circles in the chart.

Russell 2000 Index, Dow Transportation Index, and Dow Jones Financial Index broke their October 2 lows, the red circles in the chart. If the double top pattern in these three indexes are confirmed, prices will turn much lower. I think the major indexes will catch up the secondary indexes, such as $TRAN and $RUT, on the downside to confirm that the trend has changed from upside to downside.

The US dollar index is tracing out a small but very clear 5 impulsive waves up, which can not be seen in daily chart, the green circle. The stock market has been fueled by weak dollar, so a turn up in dollar shall add more downside pressure on equity market.

Also S&P500, Dow and NASDAQ have all closed beneath the up-sloping log scale trend line connecting the March low and the July low. That gives us additional evidence that Primary Wave [3] is likely underway.

Three Bear Markets Comparison

Interesting chart from Virginia Jim


The chart shows the three big bear markets from "significant low", the red arrows, which may not be the absolute lows in bear market. The green arrows are the followed bear market rally tops.

Institutional Money Flows 10/27/2009

Charts from stocktiming.com: Institutional Money Flows Chart

Institutional buying decreased and selling increased and those two lines crossed over into distribution mood. As institutional selling goes up, the market goes down.