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Sunday, April 11, 2010

S&P 500, US Dollar, Forex: Week End Review (4-9-10 Close)

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Overview


The S&P 500, SPX, is up +1.38% for the week, up +2.13% for the month, up +7.11% for the year, and up +76.54% since the March 9, 2009 market bottom. The US Dollar, USDX, is up +0.28% for the week, down -0.26% for the month, up +3.84% for the year, and down -9.23% since the March 9, 2009 top.

SPX closed Friday, April 9 at 1194.37, setting another 2010 YTD closing high. Conversely, the US Dollar has traded sideways during the week to close at 80.94. The 2010 YTD closing high was on Thursday, March 25 of 82.16.

The Big Question What happens now? Up, Down, Sideways? As we enter the quarterly earnings season, 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 have 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.  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. 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.  The recent uptick in oil prices could dampen economic recovery to some extent.

Other Major Indexes The Russell 2000, NASDAQ Composite, NASDAQ 100, Dow Jones industrial Average 30 all closed at 2010 YTD closing highs on Friday, April 9, along with the S&P 500. 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 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

Disclosure We are long AAPL, CRM, XLI.


S&P 500: Closes at 2010 YTD High 4-9-10


S&P 500 Daily Chart Below is the SPX daily chart for 2010.

Noteworthy Closing Prices on Daily Chart below:
Current Close & 2010 YTD High 4-9-10 1194.37 (Highest yellow horizontal line)
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 1093.91 (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, is a 2010 YTD closing high, therefore there is no recent resistance. However, 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 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, so I now believe this will be some long-term resistance.  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 at the YTD high and also highs 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 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. 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 9, 2010 YTD closing high of 1194.37. Therefore, SPX current close is at the lower point on the downtrend line.

Relative Strength Index (RSI)
RSI 14 day = 73.61 is slightly overbought; but has dropped from mid to high 90s of mid March
RSI 28 day = 80.09 is overbought; but has dropped from 83.30 YTD high of March 23
The RSIs are not unreasonably high. With the positive economic data discussed earlier in this post and the The RSIs are in the high part of the range for the past year, especially the 28d.

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 31, 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 think the SPX will stuggle to gain and hold 1200 as we go into earnings season, that the expectations of Q1 earnings, and indictating an economic recovery is underway, have been priced in SPX.  I don't see a significant upside for the next few weeks, perhaps a slight to moderate pullback but mostly consolidation trading.  The RSIs indicate SPX is overbought, especially the 28d.  The MACD turned bullish on April 9 on this last surge towards the 1200 area before earnings season.  The intermediate-term trend is bullish and the long-term trend remains bullish.


US Dollar: Still 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 80.94 (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 79.65 (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 recent 2010 YTD closing high, which is now recent resistance. USD is now just below the late March and past week peaks.

Support USD is at critical recent support of 80.93, the February 23 previous YTD closing high. 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 just at the top of a tremendous amount of recent support is the range trading from February 4 though March 23. The current price is also just at the top of range trading from May 2009 - July 2009 and at the lower end of a trading range back in December 2008. The history of this price area even goes back further...

Moving Averages The USD is now just above the 25d sma by .11 and the 25d sma has leveled off. USD is above the 50d, 100d, and 200d sma's. The 50d and 100d sma's are 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. The USD has now pulled back to this uptrend line and closed on it effective Friday, April 9.

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 for 10 days now.

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 84.40.

Relative Strength Index (RSI)
RSI 14 day = 51.90 is reasonable, neutral; significantly down from the 68.48 peak of March 25
RSI 28 day = 51.14 is reasonable, neutral; down from the 62.22 peak of March 26
The recent pullback and ongoing consolidation has decreased the RSIs to reasonable levels.

MACD (12,26,9) The MACD is bearish, neutral since April 1 due to the pullback and sideways trading.

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 is now just above the 25d sma, at critical February 23 support of 80.93, and right on the uptrend line.  The RSIs are reasonable, neutral and have pulled back.  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 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.  Until the Greece sovereign debt crisis is solved once and for all, apparently 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


The SPX is at a 2010 YTD closing high and the US Dollar has pulled back from a 2010 YTD closing high. There is slight uncertainty in the markets, but no fear. The USD has pulled back against the EUR and GBP while rallying versus the JPY, the net effect has been a decline in the US Dollar Index. 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.  The EUR broke down through the 25d sma on March 19 and has yet to regain. The EUR is also below the 50d, 100d, and 200d sma's. RSI 14d is now neutral at 50.10 and RSI 28d is leaning oversold at 46.50. MACD is bullish, neutral since April 1, hovering around the 0.00 line.  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 and is also now signalling a long-term bull market signal. USD has pulled back from the 2010 YTD closing high on Friday, April 2. USD is above the 25d, 50d, and 100d sma's and 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 is neutral at 61.34, as is the RSI 28d at 66.36. 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 this past week to late February levels.  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 very oversold at 80.91 and the RSI 28d is neutral at 58.28. That's quite a disparity between the 14d and 28d!  MACD became bullish on Monday, March 29. UK has also had some conflicting and weak economic data and a definitive recovery has not been signalled.  GPB appears a little toppy at this point.

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% See commentary above
JPY 13.6% See commentary above
GBP 11.9% See commentary above
CAD 9.1% Bearish, Bearish; USD just above April 6, 2010 YTD closing low; CAD at parity with USD
SEK 4.2% Bearish, Bearish; USD in middle of 2010 trading range
CHF 3.6% Bearish, Bullish, USD just above 2010 YTD lows

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. 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.

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 decent 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 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.


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