Let’s take a quick look at the UUP (Bullish Dollar ETF) which could be on the verge of a low-risk, major turning point to the upside.  Let’s pay close attention to a recent volume surge and a likely Elliott Wave fractal count which seems to be complete.

First, let’s start with the simple analysis. We’ve had a large down-move throughout most of 2009 as price peaked in March 2009 as the US Stock Market bottomed – there is currently a strong inverse relationship between the US Dollar Index and the S&P 500.

Volume surged at two locations – the June lows of $23.50 and most recently, the August lows just above $23.00.  Volume surges at the end of lengthy down-moves can be a sign either of ‘capitulation’ where the longs sell their shares in frustration all together, or more likely, it could be new buyers who perceive value at these levels and are rushing in to ’scoop up’ shares aggressively… or it could be a combination of both.

So, volume could be pointing to a bullish event ahead.

Second, there is a triple-swing positive momentum divergence (we call this the “Three Push Reversal” pattern) which – of course – has bullish implications (there was a very clear “three push” pattern on the S&P 500 going into the March lows).

As price made three new absolute price lows, the 3/10 Oscillator made higher lows with price, creating the divergence situation.

Finally, price appears to be completing a 5-wave Elliott Wave fractal pattern (complete with sub-waves labeled appropriately) into the 5-wave lows.  Please refer to our free “Elliott Wave” Education Page for more details on fractal wave counts and expectations.

As if this wasn’t enough information, there are two other bits of confirmation at the lows – two doji candle patterns have formed at the lows at the lower Bollinger Bands.

A break above the 20 and then 50 period EMA at $23.75 is all that remains to confirm a trend reversal to the upside, which would be bearish for stocks and commodities.

A clean break beneath $23.00 would invalidate all this bullish ‘technical evidence.’  It would be a bet worth taking if price actually does reverse off these levels.

I go into more detail of these intermarket relationships, as well as chart the Monthly, Weekly, and Daily structures of these markets, noting key turning points, opportunities, and levels to target or place stops in my weekly Intermarket Technical Report which is released each Sunday evening.  It’s currently only $47 for a monthly membership so please check out our premium section for additional information.

This week, and the week ahead could mark a major turning point across all key markets – don’t let it slip you by if markets start reversing trends from this point.

Corey Rosenbloom, CMT