Plotting Reversal Pathways for Stocks Oil and the Dollar

Aug 12, 2014: 9:04 AM CST

A quick look at the intraday charts of the S&P 500, Crude Oil, and the US Dollar Index reveal potential trend reversals and future price pathways.

Let’s take a unified look at these related markets and plot reversal – or else trend continuity – price pathways (giving rise to trading opportunities).

The Triple Chart perspective shows an intraday downtrend into support – with positive momentum divergences – for “Risk-On” Stocks and Oil against an uptrend into resistance with corresponding negative divergences for the “Risk-Off” US Dollar Index.

We’re seeing the continuous futures contracts in TradeStation on the 30-min chart for our comparison.

This is just a quick glance at the markets from an “intermarket” or “cross-market” perspective where we cross-check one market against another.

Though not always the case, Oil tends to trade similarly to Stocks while the US Dollar Index tends to trade opposite both markets.

In the event markets complete a reversal, look for higher prices to come in a “bullish price pathway” for Oil and Stocks against the potential for bearish movement lower for the US Dollar Index.

Specifically, a bullish reversal is confirmed in stocks above the 1,935/1,940 @ES level along with $98.50 in Crude Oil.

The futures contract sell signal develops under 81.300 in the US Dollar Index.

The alternate thesis – or “trend continuity” pathway – triggers in the opposite direction which would be a bearish breakdown under 1,900 (@ES) and $97 (@CL) in conjunction with a bullish breakthrough beyond $81.70 (@DX).

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Corey Rosenbloom, CMT
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