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Overview
The S&P 500, SPX, is down -0.19% for the week, up +1.94% for the month, up +6.91% for the year, and up +76.21% since the March 9, 2009 market bottom. The US Dollar, USDX, is up +0.19% for the week, down -0.35% for the month, up +3.64% for the year, and down -9.40% since the March 9, 2009 top.
SPX closed Friday, April 16 at 1192.13, pulling back from a 2010 YTD closing high on Thursday, April 15 of 1211.67. Conversely, the US Dollar pulled back and traded sideways during the week until Friday, spiking up to 8.79. The 2010 YTD closing high for USD was on Thursday, March 25 of 82.16.
And Now We Have Before Us The Goldman Sachs Charges It was a rather normal, typical week until the SEC announced civil fraud charges against Goldman Sachs on Friday morning, lol. Google Q1 performance and stock pullback was one of the big stories. These GS accusations bring the credibility and honesty of the major USA financial institutions, brokerages, and money center banks into further doubt and question, if that's possible. Therefore, the USA financial system reliability becomes suspect. Hence the financial sector equities thereupon took a hit, especially Goldman Sachs and the Big Red Candle of Friday, April 16 on the GS stock chart. The downdraft then became a market downdraft taking the stock indexes with it and a rebound, upward bounce for the US Dollar. I will leave this subject and you with a video of Dylan Ratigan discussing and reporting all of this, as provided by the Big Picture blog. I think the video sums it up, period, including the overall financial system fiasco.
The Big Question What happens now? Up, Down, Sideways?
A) Quarterly earnings season has begun and as I stated last week, I think the equities bull run is over for the short term, not much more upside and the USD is basically neutral with an upside bias. That is, the expectations of very encouraging corporate Q1 earnings had already been priced in the SPX. In addition, SPX has now arrived at the benchmark and milestone 1200 price area, which I believe may well be signficant resistance to convincingly overcome. SPX overcame 1200 this week rather convincingly before the Goldman Sachs pullback. This scenario would set up a pullback or at least a period of consolidation trading short term, as the 1200 area is tested. USA economic data has been overall positive and also for China, Europe, and the World. So far, USA unemployment peaked in October 2009. This recently reported China trade deficit for March has me wondering 1) how honest the Chinese are, lol and 2) if true, shows tremendous external demand. At this point, the USA economic recovery appears more legitimate. The recent uptick in oil prices could dampen economic recovery to some extent.
B) When the Greece sovereign debt crisis is settled to the satisfaction of the markets, then I believe the top is in at least intermediate-term for USD and the SPX continues upwards.
C) That friggin' Goldman Sachs, makes my commentary more complicated, as well as mostly everyone's life in the USA, lmao. The SEC charges against GS definitely dampened the markets on Friday and now even the Europeans are investigating GS and Merrill Lynch of Bank of America. These investigations and charges will drag on indefinitely, for years. Markets could be impacted off and on just as they have been by Greece, but ultimately the chatter, and reaction, should calm down. More financial institutions will be hunted down and an examples made of them. So there will be ongoing market reactions, just as with Greece, to contend with while trading...
Other Major Indexes The Russell 2000, NASDAQ Composite, NASDAQ 100, Dow Jones industrial Average 30 all closed at 2010 YTD closing highs on Thursday, April 15, along with the S&P 500. All pulled backc on Friday. For comparative purposes, the current intermediate-term and long-term trends and the date generated are:
S&P 500 Bull 3-16-10, Bull July 2009US 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
Disclosure We are long AAPL, CRM, XLI.
S&P 500: Pullback on Goldman Sachs Fraud!
S&P 500 Daily Chart Below is the SPX daily chart for 2010.
Noteworthy Closing Prices on Daily Chart below:
Current Close 1192.13 (Highest yellow horizontal line)
2010 YTD High 4-15-10 1211.67
Previous 2010 High 1150.23 1-19-10 (Second highest yellow horizontal line)
YE 12-31-09 1115.10 (Third highest yellow horizontal line)
10 Month EMA 1093.51 (Lowest yellow horizontal line)
Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signalled a bull market for the SPX on Tuesday, March 16. That is, the 25d sma is greater than the 50d sma. An intermediate-term bear market had previously been in effect since February 10, only the third such bear market signal occurring since the March 9, 2009 bottom.
Resistance The current close, the highest yellow horizontal line, has pulled back to the April 9 area, from the 2010 YTD closing high of the previous day, which is now recent resistance. The 1200 area, a benchmark and milestone price, may well turn out to be significant resistance as an upside breakthrough does signify positive expectations of a USA economic and financial system recovery. 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 area, which was the battle for holding 1200 on the way down. SPX has also entered the late 2004, early 2005 trading area, which was rather choppy, and back then this 1200 area was serving as resistance on the way up.
Support There are multiple levels of support below, being that the SPX is has pulled back from the previous day's YTD high and also the high since the March 9, 2009 market bottom. Notable support is the previous YTD high of 1150.23 on 1-19-10, the consolidation of March 17-22, and the additional trading range since March 23.
Moving Averages SPX is now well above the 25d, 50d, 100d, and 200d simple moving averages. The 25d sma bottomed on February 26 and is now ascending. The 50d, 100d, and 200d sma's are all ascending, being pulled upwards the YTD highs. The sma's have fanned out in a bullish pattern.
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. The SPX has remained well above this trendline since bouncing up above on February 9.
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 current April 15, 2010 YTD closing high of 1211.67. The Friday, April 15 pullback places SPX below the trendline.
RSI 14 day = 64.80 is reasonable; the April 15 selloff eliminated any overbough conditions
RSI 28 day = 68.57 is reasonable; again, April 15 pulled the RSIs down
The RSIs are reasonable, after the big selloff on Friday.
MACD (12,26,9) The MACD is bullish effective Friday, April 9. MACD has been trading along the 0.00 line flipping between bullish and bearish since March 26, as the change in the rate of price ascent slows down, then accelerates.
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 I stated last week I thought the SPX will stuggle to gain and hold 1200 as we go into earnings season, that the expectations of Q1 earnings, indictating an economic recovery is underway, have been priced in SPX. I also said I don't see a significant upside for the next few weeks, perhaps a slight to moderate pullback but mostly consolidation trading. However, I certainly didn't anticpate the Goldman Sachs selloff. The RSIs indicate SPX is reasonable. The MACD turned bullish on April 9 on this last surge towards the 1200 area before earnings season. However, MACD is mostly hovering around the 0.00 area. The intermediate-term trend is bullish and the long-term trend remains bullish.
US Dollar: Continues Below March 25, 2010 High
US Dollar Daily Chart Below is the USD daily chart from the November 25, 2009 low up to the current 2010 price.
Noteworthy Closing Prices on daily chart below:
Current Close 80.79 (Second highest yellow horizontal line)
2010 YTD High 3-25-10 82.16 (Highest yellow horizontal line)
YE 12-31-09 77.95 (Lowest yellow horizontal line)
10 Month EMA 79.62 (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 The current close, the second highest yellow horizontal line, is below the March 25, 2010 YTD closing high, which is now recent resistance. USD is also now below the February 23 previous YTD closing high of 80.93, which is now recent resistance. USD is now also just below the late March and early April peaks, also recent resistance.
Support USD this week broke down through what was critical recent support of 80.93, the February 23 previous YTD closing high. This is now recent resistance. The March 1 and 19 peaks at 80.73 and 80.75, respectively, are possible important recent support, as well as the March 9 closing peak of 80.57 further down. USD is now near the top of a tremendous amount of recent support: the range trading from February 4 though March 23. The current price is also near the bottom of range trading from May 2009 - July 2009 and in the middle of a trading range back in January 2009. The history of this price area even goes back further...
Moving Averages USD broke down through the 25d sma on Monday, April 12 and has remained below. USD did pin above on April 16. USD also began testing the 50d sma this past week, but closed above on Friday. USD remains above the 100d and 200d sma's. The 25d and 50d sma's are starting to level off. The 100d sma continues ascending and the 200d sma has leveled off. The 50d sma now has crossed above the 200d sma, the Golden Cross, on February 18. The 100d sma crossed above the 200d sma on March 29.
Uptrend Line The uptrend line, a rate of price ascent, is from the November 25. 2009 closing low of 74.24 up through the March 16, 2010 closing low of 79.70. The November 25 low has been the bottom, since the March 9, 2009 peak. The March 16 low has been the bottom of the 2010 pullback. USD pulled back to this uptrend line and closed on Friday, April 9 and has remained below since.
Downtrend Line The downtrend line, a rate of price descent, is from the March 9, 2009 high of 89.17 down through the March 25, 2010 YTD closing high of 82.16. USD pulled back from the YTD high the next day and has stayed below since then.
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. USD is still well below - the trendline is at approximately 84.30+.
RSI 14 day = 40.15 is bordering on oversold; significantly down from the recent 68.48 peak of March 25
RSI 28 day = 51.84 is reasonable, neutral; down from the recent 62.22 peak of March 26
The recent pullback and ongoing consolidation, even accounting for Friday's upwards spike, have decreased the RSIs to reasonable, if not 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 highest yellow horizontal line.
Conclusion The US Dollar has been below the 25d sma this week, broke down through critical February 23 support of 80.93, and also broke down through the uptrend line. USD did spike upwards on Friday, due to the Goldman Sachs fraud charges. The RSIs have pulled back, nearing oversold conditions. The MACD is bearish, neutral. USD is still above the benchmark 80.00. Positive economic data and an acceptable BLS March employment report should prop up the dollar to some extent - I don't see anything to drive the USD down significantly exclusive of a international crisis or unless Greece totally melts down as a result of squabbles in the EU and IMF confusion. I still expect yet more sideways trading to occur, a trading range established, and no definitive up or down move. At this point I'm more bullish than bearish on USD because I believe the SPX runup is about over for the short term, as I stated last week. Until 1) the Greece sovereign debt crisis is solved once and for all and 2) these ongoing fraud allegations against the major financial institutions and money center banks (e.g. Goldman Sachs, Merrill Lynch, et.al.) are also resolved once and for all, the USD has more upside momentum. The intermediate-term trend is bullish. The long-term trend remains bullish. See additional comments below in the Forex Summary.
Forex Summary
Roles reversed on Friday: the S&P 500 pulled back and the US Dollar popped. Recently there has been slight uncertainty in the markets, but no fear. Perhaps there is an increased uncertainty now due to the charges against Goldman Sachs. The USD has pulled back against the EUR, GBPm and JPY, the net effect has been a decline and sideways trading in the US Dollar Index - until Friday and the Goldman Sachs fraud charges reaction. USD is in both intermediate-term and long-term bull markets versus the EUR, JPY, and GBP, which comprise 83.1% of the US Dollar Index.
EUR/USD The EUR/USD signals are both intermediate-term and long-term bear markets and yet another bottom appears to be in for the Euro as of Wednesday, April 7, which was part of a double bottom along with the March 25 closing low. The EUR regained the 25d sma on April 11. The EUR is also below the 50d, 100d, and 200d sma's. RSI 14d is now leaning oversold at 46.45 and RSI 28d is also leaning oversold at 42.49. MACD has been bullish April 9. Is the bottom in yet again for the Euro and this upwards bounce for real? EuroZone GDP and manufacturing data isn't that bad but not as strong as the USA. And then there's the Greece sovereign debt crisis which could drive the Euro down again...
USD/JPY The USD/JPY signalled an intermediate-term bull market on Friday, March 26, but the long-term bull market signal, the 10m ema is wavering and showing neutral. USD has significantly pulled back from the 2010 YTD closing high on Friday, April 2. USD broke down through the 25d sma this week, but is still above the 50d, 100d, and 200d sma's. The 25d sma crossed above the 50d sma on Friday, March 26. The 50d sma crossed above the 100d sma on April 7. The 100d sma crossed above the 200d sma on April 2. The RSI 14d has plunged into oversold terriory at 35.79, while the RSI 28d is neutral at 59.41. Both have pulled back from overbought conditions. MACD flipped to bearish on April 9 due to the pullback. Japanese economic data has been a little conflicting this year and the latest manufacturing data was not as strong as USA, China, Europe, and the overall World.
GBP/USD The GBP/USD signals are both intermediate-term and long-term bear markets. However, the GBP has rallied significantly and the trend appears to be reversing. GBP set a 2010 YTD closing low on Thursday, March 25. GBP regained the 25d sma on Tuesday, March 30 and the 50d sma on April 8, but is still below the 100d and 200d sma's. The 25d sma bottomed on March 29 and is now ascending. The RSI 14d is now neutral at 56 and the RSI 28d is neutral at 53. MACD has been bullish since Monday, March 29. UK has also had some conflicting and weak economic data and a definitive recovery has not been signalled. GPB appears to be in consolidation at this point.
UUP ETF (US Dollar Index Bullish Fund) The UUP signals are both an intermediate-term and long-term bull 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% See commentary above
JPY 13.6% See commentary above
GBP 11.9% See commentary above
CAD 9.1% Bearish, Bearish; USD set YTD closing low on April 14; CAD has been at parity with USD
SEK 4.2% Bearish, Bearish; USD in middle of 2010 trading range
CHF 3.6% Bearish, Bullish, USD bounced above recent low set April 13
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.
Previous and Additional Market and Macroeconomic Comments
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.
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 bull run since February 9 on the SPX.
I do not foresee a double dip recession or another significant economic downturn. However, the rise in oil prices is rather bothersome. 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 was not that bad, actually encouraging, even considering snow storms! lol I expected worse numbers, especially after reasonably good November and December 2009 holiday data. USA March economic data has been encouraging overall.
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