Tuesday, May 11, 2010

S&P 500 & Euro: Definite Maybe


S&P 500: In Limbo

Below is the daily line chart for the S&P 500, SPX from the bottom of the previous 2010 pullback, February 8, through today.  SPX is below the 50 day simple moving average and above the 100d sma, almost exactly between them.  This is not an encouraging sign and the bears are undoubtedly thinking the SPX is defying gravity.  The yellow horizontal line is the benchmark 1150 price.

What is revealing on this SPX daily line chart is the yellow uptrend line, a measure of the rate of price ascent.  This uptrend line is from the March 9, 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74 (the SPX broke down through this uptrend line on Flash Crash Thursday, May 6). Yesterday, the SPX pinned upwards through this trendline but closed right at the trendline. Today, SPX failed to break through the trendline upside.

Until SPX regains and holds above the 50d sma and the noted uptrend line, a bullish signal for many traders, the S&P 500 is in limbo.

Euro: EU Bailout Enthusiasm Evaporates

Below is the daily line chart for the Euro/US Dollar for 2010.  The EU, ECB, IMF, USA Taxpayer bailout of Greece, weaker EU countries, EU financial system, and the Euro itself was supposed to strengthen the Euro, mitigate some of the strength of the US Dollar, and rally USA and Global equities back to "pre-Europe Crisis" levels.  Hmm, this hasn't happened yet.

Instead of a hoped for Euro rally above 1.30 (the higher yellow horizontal line) and onwards and upward to over 1.32, the Euro is testing 1.27 (lower horizontal yellow line).  This is bearish for USA equities, notably the SPX.  As a result of the Euro weakness, the US Dollar is staying near the 2010 YTD highs in the 84.50 area.


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