The US Dollar Index is testing the highs from last July, and so far, we seem to be stalling right below the major 84.25 breakout level. However, last Friday saw a weekly close above the breakout level, so I would imagine that once the Fed headlines are over tomorrow, it should be safe to start buying the US Dollar Index on pullbacks to the 83 level. Another weekly close above the 84.25 level opens the door all the way to 89, which is the high from the summer of 2010. Above 89, it is pretty much clear sailing straight to 100, so you can see why I still very much like the risk reward of this trade, even after the recent rally. (Click chart to enlarge.)

The euro is having an oversold bounce this week, and it is on the verge of a major breakdown, which would complete a head-and-shoulders topping pattern. This would be activated with a close below the 1.2750 level, and the downside target remains 1.20, which shows that there is still some nice risk reward in this trade. I would be selling any rallies in the euro, especially anything approaching the 1.30 level, as you have the 50-day and 200-day moving averages providing resistance there. See the chart below (click to enlarge).

It seems like volatility is creeping back in under the surface of the market, and bonds, currencies, and commodities have all been seeing some pretty crazy moves. I would continue to manage risk and reduce excessive commodity exposure where necessary. Be careful out there … another strong leg higher in this US Dollar Index rally could really start to wreak havoc on some other markets!

This article by Cody Tafel was previously published on Minyanville.

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Disclaimer: The views represented on this blog are those of the individual authors only, and do not necessarily represent the views of Schaeffer's Investment Research.

With global equities up more than 25% since their bottom last June, many investors are wondering: "Is it too late to move cash from the sidelines? Should I wait for a pullback?"

My answer to both questions: no, with a caveat. As I write in my latest Market Perspectives piece, while stock prices aren't yet in a bubble, some parts of the market do look more expensive than others.

That's why I advocate that investors, especially those just starting to dip their toes in, focus on three areas of the market that look reasonably priced.

Certain International Markets: With investors paying a big premium today for safety, the U.S. market looks somewhat stretched compared to its international peers. As such, I'd be more hesitant to commit a lot of new capital there. Instead, I'd focus on other parts of the world where valuations are lower.

Among emerging markets, I especially like the bigger ones such as Brazil and China. Among developed markets, I like smaller ones such as Hong Kong. While these international economies aren't without their problems, they generally look fundamentally sound and have been punished for slower-than-expected growth. Too much pessimism is reflected in their prices.

U.S. Mega-Caps: Another idea to consider, particularly for those wary of investing in potentially more risky emerging markets, is to look toward U.S. mega-caps, accessible through the iShares S&P 100 Fund (OEF). They're the cheapest area of the U.S. market and they tend to be less volatile than small- and mid-cap names. Plus, if we do see some pick up in stock market volatility over the summer, as I expect, mega-caps aren't likely to suffer as much as small-caps.

Certain Cyclical Sectors: In recent years, investors have been paying a big premium for the yield and relative safety of defensive sectors such as consumer staples and US utilities. In contrast, I'd put new money to work in cyclical sectors such as energy and technology, which arguably represent better long-term values than their more expensive defensive counterparts. These sectors are accessible through the iShares Dow Jones U.S. Technology Sector Index Fund (IYW) and the iShares Dow Jones U.S. Energy Sector Index Fund (IYE).

Looking forward, though I do expect that market gains will likely slow and become more volatile, I believe that global stocks will finish 2013 higher. Today's slow, but still positive, global economic growth, generally benign inflation and likely continued accommodative monetary policy should be supportive of risky assets.

The bottom line: Instead of worrying about whether it's too late to get into the market, investors looking to put cash to work should focus on where to find relative value.

Investing involves risk, including possible loss of principal. In addition to the normal risks associated with investing, narrowly focused investments typically exhibit higher volatility. Technology companies may be subject to severe competition and product obsolescence. The energy sector is cyclical and highly dependent on commodities prices. Companies in this sector may face civil liability from accidents and a risk of loss from terrorism and natural disasters.

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Securities focusing on a single country may be subject to higher volatility.

Disclaimer: The views represented on this blog are those of the individual author only, and do not necessarily represent the views of Schaeffer's Investment Research.