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It is a week ending and a month ending, as of Friday, February 26, 2009.
The S&P 500, SPX, at 1104.49, is down 0.42% for the week, up 2.85% for the month, and down 0.95% for the year. The US Dollar Index, USDX, at 80.69, is up 0.12% for the week, up 1.54% for the month, and up 3.52% for the year. Both the SPX and USD have traded sideways for the week. 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.
The S&P 500, SPX, at 1104.49, is down 0.42% for the week, up 2.85% for the month, and down 0.95% for the year. The US Dollar Index, USDX, at 80.69, is up 0.12% for the week, up 1.54% for the month, and up 3.52% for the year. Both the SPX and USD have traded sideways for the week. 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
Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, still indicates an ongoing bear market for the SPX. 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 and subsequent sideways trading has created price damage that can only be repaired through sustained higher prices.
Resistance and Support The close of 1104.49, the second highest yellow horizontal line, is in the recent resistance area from sideways trading in November and December 2009. SPX entered this resistance area on February 16 and has stayed in this range since. The trading lately has been generally identical to the aformentioned sideways trading in 2009. The resistance from the October 2009 highs has been overcome, but tested. Regaining the 1130+ price area and 2010 highs seems rather lofty at present.
Moving Averages SPX is below the 50d sma and tested the 100d sma this past week. 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 February 23. The SPX did briefly regain the 50d sma a week ago, but now has dropped below again, a bearish sign. The SPX did regain the 100d sma on February 17, but has been testing this level. Overall, indications of price weakness persist and the encouraging bull signals of a week or so ago have been reversed, which results in an overall bearish tone.
Moving Averages SPX is below the 50d sma and tested the 100d sma this past week. 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 February 23. The SPX did briefly regain the 50d sma a week ago, but now has dropped below again, a bearish sign. The SPX did regain the 100d sma on February 17, but has been testing this level. Overall, indications of price weakness persist and the encouraging bull signals of a week or so ago have been reversed, which results in an overall bearish tone.
Trend Lines 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 has broken down through this trendline last week. 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. Whether the SPX can continue above these trendlines, these rates of price ascent, will determine whether a bull market signal is generated sooner.
Long-Term Trend 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 1049.85 signal with a close of 1104.49, which is the second highest yellow horizontal line. The third highest yellow horizontal line is the benchmark 1100.00 price. The highest yellow horizontal line is the 12-31-09 year end price of 1115.10.
Conclusion The SPX had a sustained rally off the lows of earlier this month through last week, but has pulled back some and began trading sideways. The current sideways trading indicates uncertainty, but not fear. Therefore, I don't foresee a huge drop, excluding an international crisis. 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 of a week ago are gone and a bearish tone prevails. The long-term trend is still bullish.
US Dollar: Intermediate-Term Bull Market Still Intact
Intermediate-Term Trend 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 rally has stalled in the past week and sideways trading has ensued.
Resistance and Support The close of 80.69, 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 trading in May, June, and July 2009. Penetrating through this resistance would be a a major upside breakout.
Moving Averages The USD is above all the simple moving averages on the chart: 25d, 50d, 100d, and 200d. 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 100d sma has not yet crossed the 200d sma. The US Dollar gained and held the benchmark 80 price, the second highest yellow horizontal line, for 8 days now.. Overall, these are indications the price strength.
Trend Lines 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 now closed at this trendline. The second, lower yellow uptrend line, a 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. Whether the USD can continue above these trendlines, these rates of price ascent, will determine how strong this bull market is.
Long-Term Trend 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 above this 78.98 signal, the third highest yellow horizontal line, with a close of 80.69, which is the highest horizontal yellow line. The second highest yellow horizontal line is the benchmark 80.00 price. The lowest horizontal yellow line is the 12-31-09 year end price of 77.95. 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. However, the rally has stalled this past week and sideways trading now exists. 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, but the rally has stalled with sideways trading this past week. The SPX rebounded from a pullback, but has now has traded sideways this past week. There is uncertainty in the markets but not fear. I think as long as there is downward pressure on the Euro and the GBK, and perhaps the Yen, the US Dollar can rise and continue a rally. This creates downward presuure, a cap, on the SPX.
EUR/USD The EUR/USD signals are both intermediate-term and long-term bear markets, but a bottom process seems to exist at present.
GBP/USD The GBP/USD signals are both intermediate-term and long-term bear markets with no evidence of consolidation or support.
USD/JPY The USD/JPY is in both an intermediate-term and long-term bear market. A recent rally of the USD versus the JPY has failed. This strengthening of the JPY has negated the US Dollar Index bull run to some extent.
GBP/USD The GBP/USD signals are both intermediate-term and long-term bear markets with no evidence of consolidation or support.
USD/JPY The USD/JPY is in both an intermediate-term and long-term bear market. A recent rally of the USD versus the JPY has failed. This strengthening of the JPY has negated the US Dollar Index bull run to some extent.
UUP and UDN ETFs Accordingly, the related signals for the US Dollar Index ETFs reflect the overall trend. The UUP ETF, the US Dollar Index Bullish Fund, is in both an intermediate-term and a long-term bull market. The UDN ETF, the US Dollar Index Bearish Fund, is in both an intermediate-term and a long-term bear market. The UUP had an upside breakout above the 25d, 50d, 100d, and 200d sma's. The 50d sma crossed above the 200d sma, the Golden Cross, on Friday, February 26, 2010. The UDN had a downside breakdown through the 25d, 50d, 100d, and 200d sma's. The 50d sma crossed below the 200d sma on February 22, 2010.
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, below:
EURO 57.6% Bullish, Bullish; trends appears intact for USD
JPY 13.6% Bearish, Bearish; trends appears intact for USD
GBP 11.9% Bullish, Bullish; trends appear intact for USD
CAD 9.1% Bullish, Bearish; USD is consolidating, trends appear to be bearish for USD
SEK 4.2% Bearish, Bullish; trends appear to be intact for USD
CHF 3.6% Bullish, Bullish, USD is consolidating, 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.
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