Each of the major indices - the Dow Jones Industrials, Dow Jones Transports, S&P 500, NASDAQ and NYSE Composite closed today at highs for the year. For all of the indices, these are new 52-week highs as well, as the markets continue to recover from the financial meltdown of last fall.
Of particular interest to traders were the gains on the S&P and Dow Jones Transports - especially the latter, which confirmed new highs on the Industrials, to the delight of the Dow theorists. The S&P closed above the magical 1100 mark, which for many has been viewed as an impenetrable line of resistance. The S&P had failed in three prior attempts to close above that figure.
Stocks were once again buoyed by what's become known as the "risk trade", playing the weak dollar, which works in inverse relationship to stocks. The buck was bashed again; stocks flew. It's that simple.
There were a couple of hiccups which were worth noting. Around 12:00 noon, when Fed Chairman Ben Bernanke's remarks to the Economic Club of New York were released, stocks took a bit of a nosedive on the chairman's comment that the Fed had tools available to promote the US dollar, and again, right after 3:00 pm, when Meredith Whitney announced on CNBC hat she hasn't been "this bearish in a year," and viewed stocks as overvalued, with prices unrelated to fundamentals. Both times the markets dipped, then quickly recovered, but it may be notable that the indices did close off their highs for the day, with some serious tape-painting occurring at right before the final bell. In the case of the DJ Transports, the index finished the day at 1046.50, just a point above the previous high (October 20, 4055.11), hardly a ringing endorsement.
While nobody can deny anything the Fed chairman said, nor, for that matter, Whitney's views on the market, the trade is still based on a fundamentally flawed equation: that of a cheaper dollar making stocks worth more. The disconnect between a cheaper dollar and rising stocks is alarming because, while the lower dollar makes US exports more affordable overseas, it also has the relative effect of higher import prices which will no doubt negatively affect a working population that continues to see its standard of living in decline - again, one of the effects of the drooping dollar.
So, it's entirely possible that the Fed can be right, meredith Whitney can be right, but stocks will continue to go higher regardless, all due to the inverse US dollar - US equities trade.
With a number of key economic reports due out tomorrow before the opening bell, including PPI, TIC outflows and capacity utilization, trader's hope is that the numbers are overall negative toward the US economy, because that would once again slam the greenback and make stocks move higher. It's one of the most perverse trades ever seen, though after the financial implosion of 2008 and the Madoff rip-off, anything that works is simply tolerated and played until it no longer works.
Dow 10,406.96, +136.49 (1.33%)
NASDAQ 2,197.85, +29.97 (1.38%)
S&P 500 1,109.30, +15.82 (1.45%)
NYSE Composite 7,237.10, +117.21 (1.65%
Advancing issues, as expected, far outdistanced decliners, 5156-1410. New highs pounded new lows, 688-96. Volume, however, was again on the anemic side.
NYSE Volume 5,300,401,500
NASDAQ Volume 2,050,422,375
Commodities also took advantage of the weaker greenback. Oil gained $2.55, to $78.90. Gold shot to new records, up $22.70, to $1,139.40, and silver finally took off, adding $1.03, to $18.41, a record close for 2009.
Monday, November 16, 2009
Friday, November 13, 2009
Inverse US Dollar, US Stocks Relationship Continues to Boost Stocks
Once again, the inverse relationship between the US Dollar and US equity markets trumped all other trading strategies and boosted stocks on the final day fo trading for the week.
To get an understanding of how perverse and destructive this relationship has become, consider the trading action this morning, when the university of Michigan released consumer sentiment data for October. The reading, released at 9:55 am ET, fell from 70.6 in October to 66.0 in November. As the numbers hit the street the Dow Jones Industrials fell from a gain of 40 points to slightly into the negative, which would be considered a rational market reaction. However, when the forex traders got hold of the data, viewed as negative for the US economy, they immediately began to sell US Dollars into other currencies, sending the Dollar Index lower.
Faced with the prospect of virtually free money, traders poured into US stocks, turning the indices completely around in a matter of minutes. Within the hour, the Dow was up more than 80 points, with the other indices following suit. As the US Dollar continued to weaken throughout the day against other currencies, stocks held or improved gains overall in a liquidity-driven advance that had nothing at all to do with fundamentals, economic conditions or technical indications.
This is the trade that has produced the 8-month-long rally, as the Fed cut rates to zero and instituted policies that promote liquidity and risk, the very same elements which caused the near-collapse of worldwide financial systems last fall. In the long run, the inverse relationship is destructive to America's best interests, but in the short term, Wall Street is enjoying one of the greatest rallies of all time.
Dow 10,270.47, +73.00 (0.72%)
NASDAQ 2,167.88, +18.86 (0.88%)
S&P 500 1,093.48, +6.24 (0.57%)
NYSE Composite 7,119.89, +56.84 (0.80%)
On the day, advancing issues beat decliners by a healthy margin, 4005-1804, but new highs did not expand their edge over new lows, with the reading of 215-75. Volume was ridiculously low, about what one would expect from a 1/2 session in a normal market, further impressing the idea that the rally, based almost entirely on liquidity, is at its end, unsustainable.
NYSE Volume 3,936,243,500
NASDAQ Volume 1,840,433,000
Naturally, the weaker US Dollar helped commodities, though oil could not muster anything but to turn a large decline into a smaller one by day's end, dropping 59 cents, to $76.35, mostly on slack demand. Gold ramped up again, adding $10.20, to end the week at $1,116.80. Silver continued to lag behind its shiny cousin, gaining only 13 cents, to $17.39.
Next week will offer more earnings results from a variety of retailers, though economic reports are likely to dominate the financial news, with readings on retail sales, capacity utilization, PPI, CPI, housing starts and leading economic indicators among the data that will flow to investors.
To get an understanding of how perverse and destructive this relationship has become, consider the trading action this morning, when the university of Michigan released consumer sentiment data for October. The reading, released at 9:55 am ET, fell from 70.6 in October to 66.0 in November. As the numbers hit the street the Dow Jones Industrials fell from a gain of 40 points to slightly into the negative, which would be considered a rational market reaction. However, when the forex traders got hold of the data, viewed as negative for the US economy, they immediately began to sell US Dollars into other currencies, sending the Dollar Index lower.
Faced with the prospect of virtually free money, traders poured into US stocks, turning the indices completely around in a matter of minutes. Within the hour, the Dow was up more than 80 points, with the other indices following suit. As the US Dollar continued to weaken throughout the day against other currencies, stocks held or improved gains overall in a liquidity-driven advance that had nothing at all to do with fundamentals, economic conditions or technical indications.
This is the trade that has produced the 8-month-long rally, as the Fed cut rates to zero and instituted policies that promote liquidity and risk, the very same elements which caused the near-collapse of worldwide financial systems last fall. In the long run, the inverse relationship is destructive to America's best interests, but in the short term, Wall Street is enjoying one of the greatest rallies of all time.
Dow 10,270.47, +73.00 (0.72%)
NASDAQ 2,167.88, +18.86 (0.88%)
S&P 500 1,093.48, +6.24 (0.57%)
NYSE Composite 7,119.89, +56.84 (0.80%)
On the day, advancing issues beat decliners by a healthy margin, 4005-1804, but new highs did not expand their edge over new lows, with the reading of 215-75. Volume was ridiculously low, about what one would expect from a 1/2 session in a normal market, further impressing the idea that the rally, based almost entirely on liquidity, is at its end, unsustainable.
NYSE Volume 3,936,243,500
NASDAQ Volume 1,840,433,000
Naturally, the weaker US Dollar helped commodities, though oil could not muster anything but to turn a large decline into a smaller one by day's end, dropping 59 cents, to $76.35, mostly on slack demand. Gold ramped up again, adding $10.20, to end the week at $1,116.80. Silver continued to lag behind its shiny cousin, gaining only 13 cents, to $17.39.
Next week will offer more earnings results from a variety of retailers, though economic reports are likely to dominate the financial news, with readings on retail sales, capacity utilization, PPI, CPI, housing starts and leading economic indicators among the data that will flow to investors.
Thursday, November 12, 2009
S&P Confirmation Not Enough; Markets Trumped by Strong Dollar
As much as one would like to believe Tim Geithner's commitment to a strong dollar policy, skepticism will remain high until there's actual action behind his words. In the absence of official US action to strengthen the greenback, finance officials of other nations have apparently taken action over the past few days, boosting the dollar from a low of 74.8 on Wednesday morning to a high of 75.76 just before 4:00 pm ET today.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Wednesday, November 11, 2009
Getting Forex Training from Experts
Becoming successful at anything requires expertise, but when it comes to trading, acquiring such expertise can be time-consuming and expensive, especially if one is using real money starting out trading stocks, bonds, options or futures.
But, it need not be that way, since there are an abundance of resources available, many of them online, and many of them provided for free or at reasonable prices.
One such resource with which I recently became acquainted is Online Trading Academy, a company that's been a leader in the field of trader training since 1997. Not only does the company offer a variety of free and paid courses on its web site, in fields as diverse as short term trading, ETFs, options and investment theory, their 2 day Forex Trading Course is available either online or at one of their many convenient training locations - in places as geographically diverse as Ireland, Singapore, Dubai or any of their 21 US locations.
The Forex Trading course is designed to offer students a complete world view of currency trading, covering all of the basic elements such as the history of Forex and why it makes sense to switch to Forex from currencies, all the way to advanced subjects such as technical analysis, risk management, leverage and remote trading.
With a background in educating traders to make use of the same tools the professionals use, Online Trading Academy is the choice for anyone who desires to make money in the markets and the Forex Trading Course an excellent choice, taught by professionals with experience in the field.
But, it need not be that way, since there are an abundance of resources available, many of them online, and many of them provided for free or at reasonable prices.
One such resource with which I recently became acquainted is Online Trading Academy, a company that's been a leader in the field of trader training since 1997. Not only does the company offer a variety of free and paid courses on its web site, in fields as diverse as short term trading, ETFs, options and investment theory, their 2 day Forex Trading Course is available either online or at one of their many convenient training locations - in places as geographically diverse as Ireland, Singapore, Dubai or any of their 21 US locations.
The Forex Trading course is designed to offer students a complete world view of currency trading, covering all of the basic elements such as the history of Forex and why it makes sense to switch to Forex from currencies, all the way to advanced subjects such as technical analysis, risk management, leverage and remote trading.
With a background in educating traders to make use of the same tools the professionals use, Online Trading Academy is the choice for anyone who desires to make money in the markets and the Forex Trading Course an excellent choice, taught by professionals with experience in the field.
Quiet Trading Day Yields New Highs on S&P, Dow
Yesterday, as reported below, the marketeers sought confirmation for the new closing highs on the Dow Jones Industrials, and today, confirmation is exactly what was provided by the S&P 500, which finished just a fraction above the old closing high of 1097.91, at 1098.50, sufficient to keep rally hopes alive for the near term.
While confirmation by the S&P won't satisfy the purist sensibilities of the Dow Theorists in the crowd, it's a good enough finish on a very slow trading day to keep confidence in the ranks of traders, investors and speculators. Oddly enough, the brain trust at CNBC completely missed the data, not even reporting it, focusing instead on earnings from Applied Materials (AMAT) - which were outlandishly good, by the way - and the aquisition of 3Com (COMS) by tech giant Hewlett Packard (HPQ).
To the technicians among us, AMAT's earnings and the HP news don't even come close to the importance of index confirmation, and it's a testament to the shoddiness of reportage by the financial media. (Last night, I tried to watch Fox's Financial Network and was as revolted by that as I was by their political coverage. Just what does Ann Coulter know about economics? She was one of the panelists on one of their shows. I won't be tuning into that pile of garbage again soon, as I much prefer the wit and wisdom of Bloomberg's Bernie Lo (pictured at right), host of Asia Confidential, for my late-night viewing.)
Getting back to Dow Theory, we anxiously await confirmation of the new highs - and the next leg of this delicious rally - by the Dow Jones Transportation Index (^DJT), which almost turned the trick on Veteran's Day, closing at 3988.00, a mere 57 points away from the magic number. If the Transports repeat today's performance, we'll have double confirmation in hand heading into Friday's trading.
Once again, the paucity of news and/or corporate earnings reports left traders to their own wits, largely battling the ravages of a runaway dollar index, which nearly scuttled the entire affair. One should not be too concerned with a rising dollar longer term, however much the government sock puppets like Tim Geithner tout a strong dollar policy. Our intrepid Treasury Secretary, doing front work for the President, said, "I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar," yesterday when meeting with Japanese officials in Tokyo. If you listen closely, you can actually hear the polite snickering by the Japanese finance ministers.
Dow 10,291.26, +44.29 (0.43%)
NASDAQ 2,166.90, +15.82 (0.74%)
S&P 500 1,098.51, +5.50 (0.50%)
NYSE Composite 7,155.36, +28.94 (0.41%)
Advancing issues beat decliners, 3654-2181, and new highs maintained their distinct advantage over new lows, 405-75. Volume was once again pathetic, the lowest of the month so far, due partially to the holiday and partially to lack of interest from money managers who have already locked in gains of 30-40% or more for the year. Low volume has been a signature of this rally for the entire duration, so it should be no surprise that markets continue higher for the rest of the year without intense participation. It just makes it easier for those who were late to the party to catch up with the real front-runners.
NYSE Volume 4,509,091,000
NASDAQ Volume 1,873,781,875
Commodities were discounting the unusual rise in the dollar, though hardly. Oil paid the most attention, gaining just 23 cents to finish in NY at $79.28. Gold ramped higher, up $12.00 to a new record high of $1,114.50. Silver finally got some attention, adding 32 cents, to $17.55.
The final word on this newest leg of the rally is that it may be a quick and powerful one, taking the Dow up to possibly the 10,800 level before the year is out. Gone is all the bearish talk of a 10-15% correction, the market just having completed its 5th 5% pull-back a little more than a week ago. All indications point toward higher finishes until Thanksgiving.
While confirmation by the S&P won't satisfy the purist sensibilities of the Dow Theorists in the crowd, it's a good enough finish on a very slow trading day to keep confidence in the ranks of traders, investors and speculators. Oddly enough, the brain trust at CNBC completely missed the data, not even reporting it, focusing instead on earnings from Applied Materials (AMAT) - which were outlandishly good, by the way - and the aquisition of 3Com (COMS) by tech giant Hewlett Packard (HPQ).
To the technicians among us, AMAT's earnings and the HP news don't even come close to the importance of index confirmation, and it's a testament to the shoddiness of reportage by the financial media. (Last night, I tried to watch Fox's Financial Network and was as revolted by that as I was by their political coverage. Just what does Ann Coulter know about economics? She was one of the panelists on one of their shows. I won't be tuning into that pile of garbage again soon, as I much prefer the wit and wisdom of Bloomberg's Bernie Lo (pictured at right), host of Asia Confidential, for my late-night viewing.)Getting back to Dow Theory, we anxiously await confirmation of the new highs - and the next leg of this delicious rally - by the Dow Jones Transportation Index (^DJT), which almost turned the trick on Veteran's Day, closing at 3988.00, a mere 57 points away from the magic number. If the Transports repeat today's performance, we'll have double confirmation in hand heading into Friday's trading.
Once again, the paucity of news and/or corporate earnings reports left traders to their own wits, largely battling the ravages of a runaway dollar index, which nearly scuttled the entire affair. One should not be too concerned with a rising dollar longer term, however much the government sock puppets like Tim Geithner tout a strong dollar policy. Our intrepid Treasury Secretary, doing front work for the President, said, "I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar," yesterday when meeting with Japanese officials in Tokyo. If you listen closely, you can actually hear the polite snickering by the Japanese finance ministers.
Dow 10,291.26, +44.29 (0.43%)
NASDAQ 2,166.90, +15.82 (0.74%)
S&P 500 1,098.51, +5.50 (0.50%)
NYSE Composite 7,155.36, +28.94 (0.41%)
Advancing issues beat decliners, 3654-2181, and new highs maintained their distinct advantage over new lows, 405-75. Volume was once again pathetic, the lowest of the month so far, due partially to the holiday and partially to lack of interest from money managers who have already locked in gains of 30-40% or more for the year. Low volume has been a signature of this rally for the entire duration, so it should be no surprise that markets continue higher for the rest of the year without intense participation. It just makes it easier for those who were late to the party to catch up with the real front-runners.
NYSE Volume 4,509,091,000
NASDAQ Volume 1,873,781,875
Commodities were discounting the unusual rise in the dollar, though hardly. Oil paid the most attention, gaining just 23 cents to finish in NY at $79.28. Gold ramped higher, up $12.00 to a new record high of $1,114.50. Silver finally got some attention, adding 32 cents, to $17.55.
The final word on this newest leg of the rally is that it may be a quick and powerful one, taking the Dow up to possibly the 10,800 level before the year is out. Gone is all the bearish talk of a 10-15% correction, the market just having completed its 5th 5% pull-back a little more than a week ago. All indications point toward higher finishes until Thanksgiving.
Subscribe to:
Posts (Atom)
Posts
