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Bearish Divergence in Price Action for U.S. Dollar Index

|Includes: UDN, PowerShares DB USD Bull ETF (UUP)

Scott Pluschau is a Contributing Editor to the ETF Digest.

Scott was a financial advisor with Citi. His technical analysis report on the Nasdaq Composite Index was featured by Dr. Marc Faber in his June 1, 2011 Gloom, Boom & Doom report. Scott earned his degree in Accounting and Taxation from Pace University. He lives on Long Island with his wife Ilona, daughter Olivia and son Henry.



First, let me just say that I do not rely on technical indicators to make trading decisions. All my trades are based on Auction Market Principles. The futures markets trade in an auction and price is determined by supply and demand. However, I do like to glance at volume indicators.

This is the most glaring bearish negative divergence in comparison to the price action in a futures contract I have seen since I can remember. Divergence is when an asset and an indicator are moving in opposite directions. It is a lack of confirmation. 

Let's take a look at the chart below: