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The S&P 500, SPX, is up +0.86% for the week, up +5.02% for the month, up +4.02% for the year, and up +71.45% since the March 9, 2009 market bottom. The US Dollar, USDX, is up +1.17% for the week, up +0.07% for the month, up +3.59% for the year, and down -9.44% since the March 9, 2009 top.
The S&P 500, SPX, closed Friday at 1159.90, below the 2010 YTD closing high of 1166.21 set on Wednesday, March 17. The Friday close found support from the Wednesday low of 1159.94. The Wednesday and Thursday closings are now considered recent resistance and a 3 day trading range has been established.
The Big Question: What happens now? Up, Down, Sideways? An upside breakout has occurred above 1150, previously resistance but which is now important recent support. This 1150 support may be tested again. As long as SPX stays at or above 1150, this is a very bullish indicator. Any new 2010 YTD highs need the US Dollar to stop ascending, at least trade sideways, and preferably pullback some.
The Russell 2000 regained and exceed it's 2010 high first, followed by the NASDAQ Composite, and then the NASDAQ 100. Next the SPX set 2010 YTD highs in excess of the Janaury 2010 highs. The Dow Jones Industrial Average was lagging behind the SPX and other aforementioned indexes, a familiar pattern during this rally from the March 9, 2009 low as the NASDAQ 100, NASDAQ Composite, and/or Russell 2000 have led the rally with the S&P 500 following and then the Dow Jones Industrial Average lagging in the back. Now the DJIA has reached a new 2010 YTD high on Wednesday, March 17, and has been able to hold the price. I so noted this in a previous post.
The US Dollar, which had been trading sideways, rallied late in the week, mostly because of increased chatter about the Greece sovereign debt crisis. That chatter mostly consisted of the Greek government complaining about having to pay high interest rates for being a substandard borrower and Germany complaining about helping Greece, lol. The Indian central bank also raised interest rates.
As I have stated in previous posts, there is some uncertainty, but not fear, in the markets. As of now, the official unemployment rate peaked in October 2009, but the official underemployment rate, U-6, has increased recently. This Great Recession, as with all recessions, results in a certain amount of restructuriing of the economy, which is in progress. At present, I am not bearish on USA equities but cautious after this good bull run since February 9 on the SPX
I do not foresee a double dip recession or another significant economic downturn. The withdrawal of significant federal economic stimulus will result in a flattening of the rebound and perhaps a small pullback. I do see a long, slow recovery as the economy restructures to the new economic paradigm. The January and February USA economic data has not been that bad, actually encouraging, even considering snow storms! lol I expected worse numbers, especially after reasonably good November and December 2009 holiday data.
The S&P 500 is now in an intermediate-term bull market, as is the US Dollar Index. Both the S&P 500 and US Dollar Index are technically in long-term bull markets simultaneously. For comparative purposes, the current intermediate-term and long-term signals and the date generated are:
S&P 500 Bull 3-16-10, Bull July 2009
US Dollar Bull 12-21-09, Bull January 2010
Russell 2000 Bull 3-11-10, Bull July 2009
NASDAQ Composite Bull 3-15-10, Bull May 2009
NASDAQ 100 Bull 3-15-10, Bull April 2009
Dow Jones Industrial Average Bull 3-16-10, Bull July 2009
S&P 500: Intermediate-Term Bear Market Continues
Noteworthy Closing Prices
Friday Current Close 1159.90 3-19-10 (Highest yellow horizontal line)
2010 YTD High 1166.21 3-17-10
Previous 2010 High 1150.23 1-19-10 (Second highest yellow horizontal line)
YE 12-31-09 1115.10
10 Month EMA 1069.86 (Lowest yellow horizontal line)
Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, sginalled a bull for the SPX on Tuesday, March 16. That is, the 25d sma is greater than the 50d sma. An intermediate-term bear market had been in effect since February 10, only the third such bear market signal occurring since the March 9, 2009 bottom.
Resistance and Support The current close, the highest yellow horizontal line, is now below the recent 2010 YTD closing highs, which are now recent resistance. All other recent resistance has been overcome, notably the 1150 area, and have become multiple levels of support below. SPX is also trading in the September 2008 price area.
Moving Averages SPX has regained the 25d, 50d, 100d, and 200d simple moving averages and is now well above all. The 25d sma bottomed on February 26 and is now ascending. The 50d, 100d, and 200d sma's are all ascending, which is a postive sign. The 25d sma has regained the 100d and then the 50d sma's.
Uptrend Line The 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 the 2010 pullback to-date. The SPX has remained above this trendline since bouncing up above on February 9, a bullish signal.
Downtrend Line The 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 March 17, 2010 YTD closing high of 1166.21. I have reset the downtrend line to this new high and SPX remains below.
RSI 10 day = 80.53 is very overbought; has dropped from high 90s due to small pullback and consolidation
RSI 25 day = 80.25 is very overbought; has dropped from mid 80s due to small pullback and consolidation
I originally thought, even with the higher RSIs, that a pullback and/or consolidation was not imminent, beecuase the US Dollar would not strengthen significantly. However, until the Greece sovereign debt issue is resolved once and for all, I now think we could see some additional SPX consolidation and some more pullback.
MACD (12,26,9) The MACD is bullish and has been since February 16.
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.
Conclusion The SPX has rallied from lows of February, set a new 2010 YTD closing high on Wednesday, and now has pulled back some due to a strengthening of the US Dollar. SPX is at some weak recent support, stronger support is in the 1150 area below. The RSI indicates SPX is overbought, so a major upside breakout is questionable and can only be fueled by a weakening US Dollar. Therefore, until the Greek soverign debt crisis is resolved, or at least the chatter volume decreases, I don't foresee a significant upside for the SPX. I would expect more consolidation, sideways trading, and a trading range established for the interim. The 1150 area is critical support and the bottom for the SPX at this point. 1150 may well best tested soon. The intermediate-term trend is bullish and the long-term trend is still bullish.
US Dollar: Intermediate-Term Bull Market Continues
Noteworthy Closing Prices
Friday Current Close 80.75 3-19-10 (Second highest yellow horizontal line)
2010 YTD High 80.93 2-23-10 (Highest yellow horizontal line)
YE 12-31-09 77.95 (Lowest yellow horizontal line)
10 Month EMA 79.30 (Third highest yellow horizontal line)
Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, 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 21, 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 closing high and subsequent decline into a bear market.
Resistance and Support The current close, the second highest yellow horizontal line, has raised the price to the sideways trading range of February 19 through March 2, which is acting as recent resistance. The current price is also at the top of the sideways trading range that occurred in May, June, and July 2009. The USD regained the benchmark 80.00 price on Thursday
Moving Averages The USD has been testing the 25d sma since March and the current close is above. The 25d sma has basically leveled off. The 50d and 100d sma's are still ascending, while the 25d and 200d sma's are flat. The 50d sma now has crossed above the 200d sma, the Golden Cross, on February 18. The 100d sma has not yet crossed the 200d sma.
Uptrend Line The 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 been testing this uptrend line and the current close is above. Whether the USD can continue above this trendline, a rate of price ascent, will determine how strong this bull market is.
Downtrend Line The 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 downtrend line since February 23 and had not been able to stay above until the current close.
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 83.30.
Relative Strength Index (RSI)
RSI 10 = 54.98 is very reasonable; up from low of mid 20s on March 12
RSI 25 day is 55.38.11 very reasonable; up from low of mid 40s on March 16
The recent upward bounce has increased the RSIs to reasonable levels, from the previous oversold levels.
Long-Term Trend The third highest yellow horizontal 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 second lowest yellow horizontal line.
Conclusion The US Dollar has had a remarkable, rather unexpected, rally from the lows of late November and early December 2009. The rally stalled around February 19-23, sideways trading ensued, then a pullback. The USD then showed some strength on Thursday and Friday. The RSIs are mid range, after bouncing off lows indicating an oversold condition. The USD has regained the benchmark 80.00 price, which has been the center of price trading for a week. I question how much upside momentum is left unless Greece totally melts down as a result of squabbles in the EU. I expect more sideways trading to occur, a trading range established, and no definitive up or down move. The intermediate-term trend is still bullish. The long-term trend is still bullish. See additional comments below in the Summary.
Summary
Both the SPX and US Dollar appear bullish, but both rallies have stalled. 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 some 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 has closed and stayed above the 25d sma but is now testing once again. The EUR is in a trading range between the February 10 closing high and the February 24 closing low. RSI 25d is a very reasonable mid point 51.40 and MACD has been bullish since February 16.
USD/JPY The USD/JPY signals are both intermediate-term and long-term bear markets. However, the intermediate-term signal is essentially neutral. 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 have converged just above 90. The RSI 25d is slightly oversold at 43.12 and MACD has been bullish since March 7.
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 and regained the losses from the sideways tradiing. The RSI 25d is rather oversold at 39.61 and MACD has been March 11.
UUP ETF (US Dollar Index Bullish Fund) The UUP signals are both an intermediate-term and long-term bulls markets, reflecting the overall trend of the USD reviewed above.
UDN ETF (US Dollar Index Bearish Fund) The UDN signals are both an intermediate-term and long-term bear markets, reflecting the overall trend of the USD reviewed above.
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; USD has rallied late in week within trading range
JPY 13.6% Bearish, Bearish; USD has rallied late in week within a trading range
GBP 11.9% Bullish, Bullish; USD has rallied late in week within a trading range
CAD 9.1% Bearish, Bearish; USD has broken down; but bounced up from March 17 low
SEK 4.2% Bearish, Bearish; USD has bounced up from March 12 low
CHF 3.6% Bullish, Bullish, USD has bounced up from March 16 low
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 had been driving the USD bull market. However, all 3 currencies, have recently rallied resulting in the USD generally pulling back and trading sideways.
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