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After the 3 days of trading this week, the S&P 500, SPX, at 1105.24, is down 0.35% from the Friday close of 1109.17. The US Dollar Index, USDX, at 80.80, is up 0.26% from the Friday close of 80.59. Both have traded sideways mostly. The S&P 500 is in an intermediate-term bear market and the US Dollar Index is in an intermediate-term bull market. Both the S&P 500 and US Dollar Index are technically in a long-term bull market simultaneously. More about this in the analysis below and in the Summary at the end of this post.
S&P 500: Intermediate-Term Bear Market Still Intact
The second, lower yellow uptrend line, a slightly slower rate of price ascent, is a more traditional trendline. This trendline is from the March 9. 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low has been the bottom of this pullback to date. The SPX has remained above this trendline since bouncing up above on February 9.
The second, lower yellow uptrend line, a slightly slower rate of price ascent, is a more traditional trendline. This trendline is from the November 27. 2009 closing low of 74.27 up through the January 14, 2010 closing low of 76.76. The USD has easily remained above this trendline since bouncing up above on January 19.
The 25d sma is ascending steeply, as is the 50d sma, for the first time since February and March 2009. The 100d sma is also ascending, and the 200d sma rate of descent is slowing. The 50d sma crossed above the 100d sma on January 22, 2010, signalling price strength. The 50d sma now has crossed above the 200d sma, the Golden Cross, on February 18. Both are very bullish signals. The US Dollar gained and held the benchmark 80 price, the middle yellow horizontal line, for 6 days now.. Overall, these are indications the price strength.
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The US Dollar is well above this 79.00 signal with a close Wednesday of 80.80, which is the highest horizontal yellow line. The middle yellow horizontal line is the benchmark 80.00 price.
The US Dollar is bullish and breaking upside though resistance. The S&P 500, SPX, rebounded from a pullback, but has now languished in recent resistance. Through last week, the inverse correlation of the USD and SPX has been negated to some extent. This week the negative correlation has existed. I think as long as there is downward pressure on the Euro and the GBK, and perhaps the Yen, the US Dollar can rise along with the SPX. Ultimately, the inverse correlation will reassert itself, but this could be some time ahead.
The EUR/USD signals are both intermediate-term and long-term bear markets. The GBP/USD signals are both intermediate-term and long-term bear markets. Conversely, the USD/JPY is in both an intermediate-term and long-term bear market, but the USD has been rallying against the JPY since February 8. Any strengthening of the JPY would mitigate the US Dollar Index bull run to some extent.
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, still indicates an ongoing bear market for the S&P 500. That is, the 25d sma is less than the 50d sma. This is the first such bear market signal since July 2009, occurring on February 10, and only the second one since the March 2009 bottom. The recent pullback created price damage that continues to be repaired through sustained higher prices.
The close Wednesday of 1105.24, the highest yellow horizontal line, is in the recent resistance area from sideways channel trading in November and December 2009. SPX entered this resistance area last week and has stayed in this range since. The resistance from the October 2009 highs was overcome last week. Regaining the 1130+ price area after the three huge down days of January 20, 21, and 22, 2010 is next, but could be a tough slog.
I have included two yellow uptrend lines. The higher uptrend line, a faster rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the January 29, 2010 closing low of 1073.87. I am using this as a benchmark to monitor SPX price performance. The SPX had broken down through this trendline on Tuesday, but regained the trendline on Wednesday, a bullish price signal. Whether the SPX can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.
The second, lower yellow uptrend line, a slightly slower rate of price ascent, is a more traditional trendline. This trendline is from the March 9. 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low has been the bottom of this pullback to date. The SPX has remained above this trendline since bouncing up above on February 9.
The 25d sma continues to descend but the 50d sma has leveled off. The 100d sma has began to ascend. The 200d sma rate of ascent is steady. Most bothersome is the 25d sma breaking down through the 50d on February 10 and now the 100d sma on Tuesday, February 23. The SPX did briefly regain the 50d sma, but now has dropped below this week, a bearish sign. The SPX did regain the 100d sma on February 17, but has been testing this level this week. Overall, indications of price weakness persist and the encouraging bull signals of Friday have been reversed, which results in an overall bearish tone.
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The SPX is well above this 1049.98 signal with a close Wednesday of 1105.24, which is the highest yellow horizontal line. The middle yellow horizontal line is the benchmark 1100.00 price.
Conclusion
The SPX had a sustained rally off the lows of earlier this month through last week, but has pulled back some this week. The bounce upwards needs to continue to generate higher prices that will eventually sustain a signal that an intermediate-term bull market has returned through ongoing price strength. The intermediate-term trend is still bearish. The encouraging bullish signals through last week are gone and a bearish tone prevails. The long-term trend is still bullish.
US Dollar: Intermediate-Term Bull Market Still Intact
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, still indicates an ongoing bull market for the US Dollar. That is, the 25d sma is greater than the 50d sma and has been since mid-December 2009. This is the first such bull market since from early February 2009 through early April 2009. This is also the first bull market since the March 2009 highs and subsequent decline in a bear market.
The close Wednesday of 80.80, the highest yellow horizontal line, maintains the price above the sideways trading of February 5-18. The current price is in the upper resistance area of sideways channel trading in May, June, and July 2009. Penetrating through this resistance would be a a major upside breakout.
I have included two yellow uptrend lines. The higher uptrend line, a faster rate of price ascent, is from the January 14, 2010 closing low of 76.76 up through the February 16, 2010 closing low of 79.62. The USD has pinned the trendline this week but stayed above it. Whether the USD can continue above this trendline, this rate of price ascent, will determine how strong this bull market is.
I have included two yellow uptrend lines. The higher uptrend line, a faster rate of price ascent, is from the January 14, 2010 closing low of 76.76 up through the February 16, 2010 closing low of 79.62. The USD has pinned the trendline this week but stayed above it. Whether the USD can continue above this trendline, this rate of price ascent, will determine how strong this bull market is.
The second, lower yellow uptrend line, a slightly slower rate of price ascent, is a more traditional trendline. This trendline is from the November 27. 2009 closing low of 74.27 up through the January 14, 2010 closing low of 76.76. The USD has easily remained above this trendline since bouncing up above on January 19.
The 25d sma is ascending steeply, as is the 50d sma, for the first time since February and March 2009. The 100d sma is also ascending, and the 200d sma rate of descent is slowing. The 50d sma crossed above the 100d sma on January 22, 2010, signalling price strength. The 50d sma now has crossed above the 200d sma, the Golden Cross, on February 18. Both are very bullish signals. The US Dollar gained and held the benchmark 80 price, the middle yellow horizontal line, for 6 days now.. Overall, these are indications the price strength.
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The US Dollar is well above this 79.00 signal with a close Wednesday of 80.80, which is the highest horizontal yellow line. The middle yellow horizontal line is the benchmark 80.00 price.
A very long-term, well known downtrend line, not shown on this chart, from the January 2002 close of 120.22 down through the February 2009 close of 88.06, is still significantly above the USD current price, at approximately 83.50+.
Conclusion
The US Dollar has had a remarkable rally from the lows of late November and early December 2009. All the indicators reviewed above are positive for a continuing bull run. The intermediate-term trend is still bullish. The long-term trend is still bullish. See comments below in the Summary.
Summary
The US Dollar is bullish and breaking upside though resistance. The S&P 500, SPX, rebounded from a pullback, but has now languished in recent resistance. Through last week, the inverse correlation of the USD and SPX has been negated to some extent. This week the negative correlation has existed. I think as long as there is downward pressure on the Euro and the GBK, and perhaps the Yen, the US Dollar can rise along with the SPX. Ultimately, the inverse correlation will reassert itself, but this could be some time ahead.
The EUR/USD signals are both intermediate-term and long-term bear markets. The GBP/USD signals are both intermediate-term and long-term bear markets. Conversely, the USD/JPY is in both an intermediate-term and long-term bear market, but the USD has been rallying against the JPY since February 8. Any strengthening of the JPY would mitigate the US Dollar Index bull run to some extent.
Accordingly, the related signals for the US Dollar Index ETFs reflect the overall trend. The UUP ETF, the US Dollar Index Bullish Fund, is both intermediate-term and long-term bull market. The UDN ETF, the US Dollar Index Bearish Fund, is both intermediate-term and long-term bear market. The UUP had an upside breakout above the 200d sma and the UDN had a downside breakdown through the 200d sma.
The US Dollar Index is comprised of 6 currencies, which are weighted. The current intermediate-term and long-term signals, the USD trend vs that currency, are noted, after the weighting percentage.
EURO 57.6% Bullish, Bullish; trends appears intact for USD
JPY 13.6% Bearish, Bearish; trends are reversing for USD
GBP 11.9% Bullish, Bullish; trends appear intact for USD
CAD 9.1% Bullish, Bearish; trends appear to be bearish for USD
SEK 4.2% Bearish, Bullish; trends appear to be intact for USD
CHF 3.6% Bullish, Bullish, trends appear to be intact for USD
So, the Euro, JPY, and GBP are weighted a total of 83.1% of the US Dollar Index. Therefore, the USD trends versus Euro and GBP are what is driving the USD bull market. A major rally of the Euro and GBP does not appear imminent.
So, the Euro, JPY, and GBP are weighted a total of 83.1% of the US Dollar Index. Therefore, the USD trends versus Euro and GBP are what is driving the USD bull market. A major rally of the Euro and GBP does not appear imminent.
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