After a 14% stock market rally in March, we were focusing on S&P resistance into 782 this morning that could provide further fuel to a rallying dollar. I specifically listed an S&P 500 resistance zone of 768-782. The equity markets were comfortably positive on the session, but the S&P ran into the mid-point my resistance zone before reversing all gains on the session to finish down -0.35%. The S&P highs were 774.53 in the cash market and 771.15 in the futures markets. The dollar responded as we would expect, which was higher.

This morning I noticed a tendency for the currency markets to lead the equity markets. Take a look at the 7:30 a.m. ET high in EUR/USD that foretold the 12:15 p.m. ET high in the stock market. Very nice intermarket relationships at work today. I am troubled, however, in the ensuing dollar strength. The pullback is in a clear 3-waves suggesting correction and not a new trend down. If we are in a new downtrend and market is counting out 1-2, i-ii, we should see a 3rd wave of 2 different degrees unfold shortly before the market recaptures 1.3030. Further, there is a significant support level at 1.2925 that could interrupt this dollar strength. I am most likely sitting on my hands tonight to watch things unfold.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.