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Overview
The S&P 500, SPX, is up +0.99% for the week, up +0.74% for the month, up +5.65% for the year, and up +74.14% since the March 9, 2009 market bottom. The US Dollar, USDX, is down -1.09% for the week, down -0.44% for the month, up +3.54% for the year, and down -9.49% since the March 9, 2009 top.
SPX closed Thursday, April 1 at 1178.10, setting another 2010 YTD closing high. Conversely, the US Dollar has pulled back during the week to close on Thursday at 80.71. The 2010 YTD closing high was on Thursday, March 25 of 82.16.
The Big Question: What happens now? Up, Down, Sideways? An upside breakout has occurred above 1150 for the SPX, previously resistance but which is now important recent support. There was positive USA manufacturing data this week and also for China, Europe, and Globally. The BLS March employment report was not as good as hoped for but acceptable. 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. We may already be at that point.
Other Major Indexes The Russell 2000 and NASDAQ have pulled back from the 2010 YTD closing highs on Tuesday, March 23 and are trading sideways. The NASDAQ 100 set a 2010 YTD closing high on Tuesday, March 30 and has pulled back. These 3 aforementioned indexes, are generally leading indicators so the response to the BLS March employment report on Monday will be interesting. The Dow Jones industrial Average 30 set a 2010 YTD closing on Thursday, April 1 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
S&P 500: At 2010 YTD High 4-1-10
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 4-1-10 1178.10 (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 1090.96 (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 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. 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, but nothing appears of consequence for resistance or support. SPX has also entered the late 2004, early 2005 trading area, which was rather choppy, so maybe this could have some long-term consequence as resistance?
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,.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 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 April 1, 2010 YTD closing high of 1178.10. Therefore, SPX current close is at the lower point on the downtrend line.
Relative Strength Index (RSI)
RSI 14 day = 71.53 is slightly overbought; but has dropped from mid to high 90s of mid March
RSI 28 day = 75.11 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 Greece sovereign debt crisis rather quiet for the time being, there appears to be some more upside for SPX. However, until the Greece sovereign debt issue is resolved once and for all, it's possible we could see some additional SPX consolidation and some pullback as the US Dollar maintains strength.
MACD (12,26,9) The MACD is bearish effective March 31. MACD had been bullish since February 16. However, the SPX rate of ascent has decreased, causing this MACD bear signal and a negative divergence.
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 has some more upside, some more juice. The SPX has rallied from lows of February and set yet another new 2010 YTD closing high. The RSIs indicate SPX is overbought, but not unreasonably so. The MACD turned bearish on March 31 and has a negative divergence, yet I think SPX has some more room to run to the upside. The intermediate-term trend is bullish and the long-term trend remains bullish.
US Dollar: Pullback from 2010 Highs
US 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 80.71 (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 79.61 (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 also below another recent 2010 YTD closing high of 80.93 on February 23, which is now recent resistance. USD is now just below the March 1 and March 19 peaks, in the February 18 - March 10 and March 19-24 trading range, but nothing appears of consequence for resistance or support.
Support USD on Thursday, April 1 broke down through critical recent support of 80.93, the February 23 YTD closing high previously. The March 9 closing peak of 80.57 is the next recent support and another line in the sand. 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 .04 and the 25d sma has leveled off. USD is above the 50d, 100d, and 200d sma's. The 25d, 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 tested this uptrend line and bounced above on March 18. The USD has stayed above subsequently, but the April 1 close is just above.
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 5 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 84.50.
Relative Strength Index (RSI)
RSI 14 day = 58.06 is reasonable, neutral; down from the 68.48 peak of March 25
RSI 28 day = 50.95 is reasonable, neutral; down from the 62.22 peak of March 26
The recent pullback has decreased the RSIs to reasonable levels.
MACD (12,26,9) The MACD is bearish effective April 1. MACD had been bullish since March 24.
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, critical February 23 support of 80.93 was broken, and the MACD is now bearish. The RSIs are reasonable, neutral. USD is still above the benchmark 80.00. Positive manufacturing 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. 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. 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 set a 2010 YTD closing high and the US Dollar has pulled back from a 2010 YTD closing high. There is some 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 Thursday, March 25. 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 oversold at 38.75 and RSI 28d is leaning oversold at 49.17. MACD switched to bullish on Thursday, April 1. Is the bottom in 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. The USD is now at a 2010 YTD closing high. USD is above the 25d, 50d, and 100d sma's and the 25d sma crossed above the 50d sma on Friday, March 26. The 100d sma is about to cross above the 200d sma. The RSI 14d is very overbought at 87.06, but the RSI 28d is overbought at 74.59. MACD has been bullish since March 7 and is ascending. 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 Globe.
GBP/USD The GBP/USD signals are both intermediate-term and long-term bear markets. GBP set a 2010 YTD closing low on Thursday, March 25, as did the Euro. GBP regained the 25d sma on Tuesday, March 30 but is still below the 50d, 100d, and 200d sma's, with the sma's previously fanning out in classic bearish mode. The 25d sma has now leveled off and stopped descending. The RSI 14d is near oversold at 45.64 and the RSI 28d is neutral at 56.03. 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.
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 at 2010 YTD closing low
SEK 4.2% Bearish, Bearish; USD in middle of 2010 trading range
CHF 3.6% Bearish, Bullish, USD near 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.
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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. 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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