2010 has been quite a year for me – so much to be thankful for – a new little boy (Bobby) and a very, very busy day job. But it’s time I got back to posting to ETF Prophet on a regular basis. One of the things holding me back from writing more was a serious systems problem where my main computer went down – it took me literally months to recover because of the nature of the outage. But enough excuses, let’s get to some thoughts….
The last series of posts talked a lot about the correlation between the VIX and Dollar (UUP), and I thought that the dollar would likely bounce – to what level was the question. Turns out, my target of the top of the channel, represented a good target as is shown in the screen shot below:
As you can see, we hit the target of the top of the channel, broke through it and then continued up. Using a Fib extension, we see that the dollar moved up to the 161.8% extension and then sold off. I closed half my position at the top of the channel and let the rest ride with a stop – I got stopped out. A good trade.
So far, the correlation I mentioned between the SP-500 and the dollar has held – the SP-500 started taking off and the dollar, as the correlation would predict, sold off.
The trade worked out well – so what now? I’ll be continuing to watch this correlation, and would look to get long the dollar again if start to see a sell-off in the SP-500. The dollar also seems to have found support having bounced three times off the same area – that is not, if the correlation is maintained, a good omen for the general market in my opinion.
I’ll be upping my postings in 2011! So let me just wish all of the ETF Prophet readers a very happy, safe and profitable 2011!
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