The pendulum is swinging on U.S. dollar trades.
Tuesday, February 9, 2010. 9:15 am.
Last year by far the most popular trade was to sell the U.S. dollar short and buy the Euro. By the end of the year the favorite term for the dollar’s future was that “The dollar is toast.”
But as happens continuously in investing, the pendulum swings between extremes, and has been swinging in the opposite direction on the dollar for three months now.
It was interesting to read in The Financial Times this morning that “Traders and hedge funds have bet nearly $8 billion against the Euro, amassing the biggest ever short position in the single currency, on fears of a eurozone debt crisis”.
Quite a change in sentiment.
It’s been working well for our December 13 buy signal on the dollar, and purchase of the dollar etf UUP, the dollar having been a safe haven as the stock market has been declining.
Yesterday in the U.S. Stock Market.
The market began to the upside until the typical countertrend move began around 11 a.m.
It then worked its way lower all afternoon, staying within a descending trading band, finally plunging even further in the final minutes, and closing on its low.
Volume was low at only 1.1 billion shares traded on the NYSE.
Not a good start to the week, particularly with sell programs rather than buy programs at the end of the day.
The Dow had broken below the psychological support at 10,000 and 9900 on Friday, before recovering to close up some on the day, and back above 10,000.
But yesterday it closed down triple-digits, and below 10,000, and closing at 9,908, almost closed below 9,900. Not that round numbers mean anything technically as support or resistance levels, but they are psychological numbers that can affect investor emotions.
Yesterday’s intraday chart:
The Dow closed down 103 points, or 1.03%. The S&P 500 closed down 0.9%. The NYSE Composite closed down 1.0%. The Nasdaq closed down 0.7%. The Russell 2000 closed down 1.1%. The DJ Transportation Avg. closed down 0.8%.
Asian markets recovered some last night.
The DJ Asia-Pacific Index closed up 0.3%.
Among individual countries:
Australia closed down 0.4%. China closed up 0.5%. Hong Kong closed up 1.2%. India closed up 0.7%. Indonesia closed up 0.6%. Japan closed down 0.2%. Singapore closed up 1.9%. South Korea closed up 1.1%. Taiwan closed up 2.0%.
If you’d like to see a three-month chart of any or all of the above indexes click here, and then click on any of the markets in the similar list at the left side of the page it takes you to.
Markets this morning.
European markets are also up some this morning, on average of about 0.3%.
Oil is up $.60 a barrel at 72.49 at the moment.
Gold is up $7 an ounce at $1,073 at the moment.
Markets in the U.S.
This week there will be very few potential market-moving economic reports. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.
And the 4th quarter earnings reporting period is winding down.
That leaves the market trading primarily on its new worries of a potential Eurozone debt crisis, economic growth or lack thereof for the rest of the year, the time table for removing stimulus efforts, etc.
Short-term, the oversold condition under 21-day moving averages should produce at least oversold bounces, but the market has struggled to even produce those, becoming even more oversold short-term yesterday. (see chart of the morning).
But our pre-open indicators are positive this morning, pointing to the Dow being up 40 points or so in the early going.
Stock Market Patterns.
This is the week before this month’s options expirations week, and the week before tends to be negative. However, with the market so short-term oversold that is in question.
Interesting Charts of the Morning.
As I asked yesterday morning, are the major indexes oversold enough beneath 21-day moving averages to produce at least an oversold rally back up to the m.a.?
It didn’t happen yesterday, with early strength giving way to another down day to a new pullback low. But today?
Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.
To read my weekend newspaper column ‘Can Corrections Be Better Than Rallies?’ click here!
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