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Top Technical Trades: SPX, Dollar, Nat Gas

Tickers in this article: SPX
NEW YORK ( -- Wednesday's price action was bearish again and we are patiently waiting for a counter-trend pullback to happen. While there are some good-looking plays out there, I really do not want to get long until the market clears the air with a bout or three of strong selling. Remember 3:4 stocks follow the market and the odds of picking a commodity or ETF that bucks the trend is unlikely.

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S&P 500 / Broad Stock Market

We have seen a big run-up in stocks this month and things are looking a little long in the teeth. A large number of stocks are trading above their upper Bollinger bands and the broad market is testing that key resistance level also. Typically when a Bollinger band is reached, we see price reverse for a couple days, at minimum.

While the equities market is in a new uptrend, as seen by the moving averages, a pullback seems imminient. The last two days have formed reversal candles and are pointing to lower prices.

Dollar Index Hourly Chart

This chart shows a possible bottom forming in the dollar pointing to a three- to eight-day pullback in stocks.

Gold Futures Hourly Chart

Natural Gas Hourly Chart

Trading Conclusion

Looking at the charts on several different time frames, not all shown here, technical analysis shows a pullback in stocks is highly likely. This is what we are currently positioned for.

The U.S. dollars downward momentum is slowing and if it can find a bid today, it should trigger strong selling in both stocks and commodities. Gold and silver are down sharply along with miners.

We have been watching natural gas for a few months and know that it has been trading inverse to what stocks do. This bodes well for a bounce in natural gas, if stocks start a selloff. That being said, natural gas is trading at a key tipping point that could spark a very fast and hard drop. This knife can fall at a speed that will take a slice out of your trading account, if not traded and managed properly (tiny position and use of a stop).

I actually like natural gas the more it moves down and could issue a buy alert on it today or this week. I would like to see volume decline at this level, showing the momentum is slowing.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.