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Chris Ciovacco
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Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?,... More
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  • Stocks, Dollar Anticipating Bailout for Ireland 0 comments
    Nov 21, 2010 2:06 PM | about stocks: SPY, UUP

    As we head into a new week, both stocks (NYSEARCA:SPY) and the U.S. dollar (NYSEARCA:UUP) need to be monitored closely. According to a Sunday story from Bloomberg:

    Finance Minister Brian Lenihan said Ireland will apply for a bailout as it sets itself up to be the second euro member to seek a rescue from the European Union and the International Monetary Fund.

    “I will be proposing to my colleagues that they should formally apply for a program,” Lenihan said in an interview with state broadcaster RTE in Dublin. “The banks were too big a problem for the country. The key issue all the time for the government is to ensure that we do not have a collapse of the banking sector (Full Story).”

    While the current rally attempt in the S&P 500 is not all that convincing thus far, stocks did find support at a logical point. The pink trendlines are based on the July and September 2010 lows. The blue trendlines are based on the April and November 2010 highs. The numbers shown on the chart below (top-left) represent Fibonacci retracement levels from the breakout above 1,130 to the recent highs. The recent correction retraced roughly 50% of that up move.

    Whether or not the S&P 500 can hold above its recent closing low of 1,178 remains to be seen, but there is ample evidence in hand to at least leave the door open to higher highs occurring between now and year-end.

    The chart of the dollar below can help us better discern if the  recent rally attempt may have more legs after some corrective action. The big picture still leans bearish for the greenback, but there are a few reasons to keep the door open to higher highs over the next two weeks.
    On November 18th, U.S. stocks and the risk-trade took a step in the right direction.  Monday and Tuesday's action this week may tell us if the move can take us to higher highs.

    Disclosure: Long UDN

    Stocks: SPY, UUP
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