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All eyes are on the S&P 500, SPX, price of 1150 with today's close of 1145.61. The 2010 high was 1150.23 on Janaury 19. This is the last of recent resistance, regaining and exceeding this price would be an upside breakout for the SPX.
The S&P 500, SPX, has managed a gain so far this week: up +0.61% for the week, up +3.72% for the month, up +2.74% for the year, and up +69.34% since the March 9, 2009 market bottom. The US Dollar, USDX, is bascially flat, up slightly +0.14% for the week, down -0.15% for the month, up +3.36% for the year, and down -9.64% since the March 9. 2009 top.
Both the SPX and US Dollar are up by approximately the same amount this month. The Greece sovereign debt crisis is perceived, at least temporarily, as managed, and the USA February unemployment rate was reported last week steady at 9.7%. The USD rally has stalled and is now tradinig sideways. There has not been any particularly good or bad USA and global economic or financial system reports or data this week.
The S&P 500, SPX, has managed a gain so far this week: up +0.61% for the week, up +3.72% for the month, up +2.74% for the year, and up +69.34% since the March 9, 2009 market bottom. The US Dollar, USDX, is bascially flat, up slightly +0.14% for the week, down -0.15% for the month, up +3.36% for the year, and down -9.64% since the March 9. 2009 top.
Both the SPX and US Dollar are up by approximately the same amount this month. The Greece sovereign debt crisis is perceived, at least temporarily, as managed, and the USA February unemployment rate was reported last week steady at 9.7%. The USD rally has stalled and is now tradinig sideways. There has not been any particularly good or bad USA and global economic or financial system reports or data this week.
The S&P 500 continues in an intermediate-term bear market and the US Dollar Index continues in an intermediate-term bull market. Both the S&P 500 and US Dollar Index are technically in long-term bull markets simultaneously. More about this in the analysis below and in the Summary at the end of this post.
I'm slowly building my template for these updates. In this post I am adding 3 indicators and related commentary: Downtrend Line, RSI, and MACD.
S&P 500: Intermediate-Term Bear Market Continues
Noteworthy Closing Prices
Current 1145.61
2010 High 1150.23 (1-19-10)
YE 12-31-09 1115.10
10 Month EMA 1067.26
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 2010 pullback, correction has created price damage that can only be repaired through sustained higher prices.
Resistance and Support The current close, the highest yellow horizontal line, is now at recent resistance from the sideways trading in January and the 1-19-10 YTD high. The sideways trading resistance in November and December 2009 was overcome on March 2. SPX had entered that resistance area on February 16. The resistance from the October 2009 highs had been overcome even earlier. Regaining the Janaury 19, 2010 closing high of 1150.23 is now possible and being closely watched by traders.
Moving Averages SPX regained the 50d simple moving average, an indicator of price strength, on March 1 and is now well above. The 25d sma bottomed on February 26 and is now ascending, another bullish sign. The 50d, 100d, and 200d sma's are all ascending, which is a postive sign. The 25d sma broke down through the 50d on February 10 and the 100d sma on February 23. However, the 25d is now ascending towards both and may regain the 100d sma tomorrow. The SPX closed above the 100d sma on February 24 and continues above. Overall, few indications of price weakness persist, the bull signals have increased in frequency and intensity over the last 8 trading days.
Uptrend Line The yellow uptrend line, a measure of the rate of price ascent, 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 2010 pullback to-date. The SPX has remained above this trendline since bouncing up above on February 9, a bullish signal. Whether the SPX can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.
Downtrend Line The yellow downtrend line, a measure of the rate of price descent, is from the October 9, 2007 all-time closing high of 1565.15 down through the January 19, 2010 closing high of 1150.23. The 2010 closing high is the YTD high so far. On March 5 the SPX broke upside though this trendline, a bullish signal.
Relative Strength Index (RSI 25 day) The 25 day RSI is a reasonable 61.34, which is not too overbought, and has recently declined slightly. The SPX RSI is about the same as the US Dollar RSI of 62.36, so which one is going to give? lol I'm using the 25 day average because I am looking at the intermediate-term view and matching the RSI with my fastest simple moving average. Therefore, I want a slower signal to match my time frame, not a faster signal used by many.
MACD (12,26,9) The MACD is bullish and has been since March 4. I am using the traditional 12,26,9 MACD signals. These signals are perhaps just a little too fast for my intermediate-term view but are understood well by those familiar with MACD.
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 signal at the current close, which is the highest yellow horizontal line. The middle yellow horizontal line is the 12-31-09 year end price of 1115.10.
Conclusion The SPX has rallied significantly off the lows of February, has broken out upside, and is near the January 19, 2010 closing high YTD of 1150.23. I believe an upside breakout through this recent resistance is imminent because the Russell 2000, NASDAQ 100, and NASDAQ Compositie have already done so. There has been some uncertainty, but not fear. The weakening and leveling off of the US Dollar recently has assisted, which is expounded upon below. Therefore, I don't foresee a huge pullback in the SPX, excluding an international crisis such as a military event or sovereign debt 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, with very encouraging bullish signals. The long-term trend is still bullish.
US Dollar: Intermediate-Term Bull Market Continues
Noteworthy Closing Prices
Current 80.57
2010 High 80.93 (2-23-10)
YE 12-31-09 77.95
10 Month EMA 79.27
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 December 22, 2009. This is the first such bull market signal since from early February 2009 through early April 2009. This is also the first bull market since the March 9, 2009 clsoing high and subsequent decline into a bear market. The rally has stalled since February 19, a pullback occurred, and now sideways trading has ensued.
Resistance and Support The current close, the highest yellow horizontal line, maintains the price just above sideways trading range of February 5-17, which is acting as support. The current price is in the sideways trading range that occurred in May, June, and July 2009. The USD was not able to reach the June 15, 2009 closing high of 81.18 and has now pulled back.
Moving Averages The USD tested the 25d sma on March 3, 4, and 8 but has now closed above. This was the first test since mid January, a potentially bearish sign. The USD is above 50d, 100d, and 200d sma's. The 25d, 50d, and 100d sma's are still ascending. 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 regained the benchmark 80 price on March 3, the middle yellow horizontal line.
Uptrend Line The yellow uptrend line, a rate of price ascent, is from the November 25. 2009 closing low of 74.24 up through the January 14, 2010 closing low of 76.76. The November 25 low has been the bottom, since the March 9, 2009 peak. The USD has easily remained above this trendline since bouncing up above on January 19. Whether the USD can continue above this trendline, a rate of price ascent, will determine how strong this bull market is.
Downtrend Line The yellow downtrend line, a rate of price descent, is from the March 9, 2009 high of 89.57 down through the February 23, 2010 closing high of 80.93. The 2010 closing high is the YTD high so far. The USD has been struggling with this trendline since February 23 and has not been able to stay above.
Downtrend Line Very Long-Term A very long-term, well known downtrend line, not shown on this chart, from the January 2002 close of 120.22 down through the March 9, 2009 close of 89.17, is still significantly above the USD current price, at approximately 83.40.
Relative Strength Index (RSI) The 25 day RSI is a reasonable 62.36, which is not too overbought, and has recently declined slightly. As noted previously, the SPX RSI is a similar 61.34. I'm using the 25 day average because I am looking at the intermediate-term view and matching the RSI with my fastest simple moving average. Therefore, I want a slower signal to match my time frame, not a faster signal used by many.
MACD (12,26,9) The MACD is bullish and has been since December 15, 2009. I am using the traditional 12,26,9 MACD signals. These signals are perhaps just a little too fast for my intermediate-term view but are understood well by those familiar with MACD.
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 USD is above this signal at the current close, which is the highest yellow horizontal line. The middle yellow horizontal line is the 12-31-09 year end price of 77.95.
Conclusion The US Dollar has had a remarkable rally from the lows of late November and early December 2009. This rally has recently stalled, a small pullback occurred, and now sideways trading has ensued. All the indicators reviewed above continue to be positive for a continuing bull run. However, I question how much upside momentum is left at least in the short term. I believe additional sideways trading may occur and a trading range established. 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, first with a small pullback, and now sideways trading. The SPX rebounded from the 2010 pullback, traded sideways, and now has had an upside breakout. There is some uncertainty in the markets, but not fear. Any further downward pressure primarily on the Euro, then the GBK, and perhaps the Yen, will determine whether the US Dollar can rise and continue a rally. This scenarion would create downward presuure, a cap, on the SPX.
EUR/USD The EUR/USD signals are both intermediate-term and long-term bear markets, but a bottoming process and sideways trading began February 18. The EUR did close above the 25d sma on March 3, the first time since January 18 and continues interaction. The EUR is staying above the February 24, 2010 closing low of 1.34674, which has resulted in the USD rally stalling.
USD/JPY The USD/JPY is in both an intermediate-term and long-term bear market. The USD has bounced above the March 3, 2010 closing low of 88.4590 and is well above the November 29, 2009 closing low of 86.3530. The 25d, 50d, and 100d sma's are all converging just above 90. The 25d sma did break down through the 100d sma on March 1. This strengthening of the USD has assisted the US Dollar Index price in leveling off and offsetting EUR weakness.
GBP/USD The GBP/USD signals are both intermediate-term and long-term bear markets. The GBP has bounced up from the March 1, 2009 closing low of 1.49256 low, but has now weakened some.
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 has had an upside breakout above the 50d, 100d, and 200d sma's. The 50d sma crossed above the 200d sma, the Golden Cross, on Friday, February 26, 2010. The UUP did close above the 25d sma on March 4 and the current close is right at the 25d sma. Conversely, the UDN has had a downside breakdown through the 50d, 100d, and 200d sma's. The 50d sma crossed below the 200d sma, the Black Cross, on February 22, 2010. The UDN did close above the 25d sma on March 3, the first time since January 19, but has now pulled back below.
The US Dollar Index is comprised of 6 currencies, which are weighted. The current intermediate-term and long-term signals, the USD trend versus that currency, are noted, after the weighting percentage, below:
EURO 57.6% Bullish, Bullish; a top and pullbackc has occured; trends appears intact for USD
JPY 13.6% Bearish, Bearish; a rally has failed so far; trends appears intact for USD
GBP 11.9% Bullish, Bullish; a top and pullback has occurred; trends appear intact for USD
CAD 9.1% Bearish, Bearish; USD has broken down; 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 has pulled back, sideways trading, 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, JPY, and GBP are what has been driving the USD bull market. However, all 3 currencies, have recently rallied resulting in the USD pulling back and trading sideways.
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