DOLLAR SHOWS STRENGTH

The dollar had a strong rally today as China announced some tightening measures for their economy. As predicted, the commodity stocks sold off in a big way. Gold, silver, and oil all closed below their 10 day MA's for the first time in a couple of months. AAPL and IBM both rallied after gapping down, but they failed to overcome the drop. The S&P 500 was well below its 10 day MA before rallying up off the lows going into the close. This late session rally created more uncertainty. The dollar clearly moved above its 10 day MA, but the late day rally in the market shows that the buyers are still there....buying every pull back. If the market can continue the selling tomorrow, the correction will likely be underway. If the buyers step in and the market rallies back up above its 10 day MA, you might expect the S&P 500 to move up to the 1200 area. If the market trades up tomorrow, look at buying calls on GS. I told you about this ascending triangle pattern last night. It was above the resistance of the triangle for most of the day, but it did close back below the $157 resistance. If it can close above $157 in the next day or so, you could see a run up to the $175 area. CRUS still looks like a great put option trade. It came close to closing below $16 which was the key confirmation level I mentioned last night. Keep watching the dollar. Most of the 98% that are bearish on the dollar have come out and dismissed today's rally. If the dollar can move higher again tomorrow, you could start to see some panic as these traders start to lighten up on their positions. This could lead to a massive rally in the dollar if everyone tries to head for the exit at the same time. I will be watching the dollar closely tonight. GILD could be another possible bullish trade if the market rallies higher tomorrow.