The other day I thought that we'd probably need some good news to propel the indices above their 50-day moving averages. It's debatable whether today's Fed statement was good news but the buyers liked it enough to push the S&P 500, Nasdaq and Dow above their 50-day moving averages. The Dow had the most impressive move above that line but, like the other indices, it failed to make a new high for the month. It's often the case that we don't see the true reaction to these Fed decision days until a day or two later, so I'd really like to see some follow through in the coming days. Closes above the December highs would be a good technical signal.
I didn't plot Bollinger Bands on the S&P and Nasdaq charts below but the upper bands on both are starting to turn upward. Could it be that we're in for a Santa Claus rally that walks up the upper bands??? I guess stranger things have happened. I've been expecting a massive short squeeze that never seems to materialize, so maybe something like that will help push the market higher.
Financials had huge gains today, yet their key indices are still in bear mode. Here are the Broker Dealer and Banking indices.
There were a lot of people who said that the rally the dollar has enjoyed since July was doomed to fail. It's starting to look like those folks were correct. The cliff dive the dollar started last week is continuing.
Lots of improvement today, notably in the intermediate trends which haven't been better than "down" since September.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Down |
| Intermediate | Lat(+) | Up(+) | Lat(+) |
| Short-term | Up(+) | Up(+) | Up(+) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Can I take some of the credit for talking the dollar down? Go gold...!
Loved the action today, but I agree that we need follow-through tomorrow! Worried about the dollar.. the speed at which the greenback is falling is quite alarming. Rising commodity prices and the threat of inflation will again be on the table. Bernanke needs to address this sooner rather than later. I agree with Dr. Duru... gold is looking better and better.
Steve C,
The niggling problem I have with gold is it isn't suffered to the same degree as other commodities, or even other precious metals (Silver and Platinum).
The dollar hasn't been anyone's love child in a while, but by default I think the worst has been priced in and now other currencies are in catch-up mode. This will be 'bullish' for the dollar and 'bearish' for gold (and commodities in general). So while the rate cut has hurt the dollar in the short term, other Central banks are going to have to be as aggresive (and coming from higher base rates) which will hurt their currencies and benefit the dollar.
As for commodities, there won't be a true bottom until all capitulate and gold is the only commodity not to do so - but I don't see many complain about it so maybe I wrong on this???
I have taken a nibble at DXO from a commodity perspective (so even if there is some downside to come from a collapse in gold I still think oil is dirt cheap) and would like gold more if it took a bigger hit. From a broader perspective I think we are only 5 years into a 20-35 year secular commodity bull market so I see real value in commodities at these levels, I just can't shake the feeling gold is mispriced in this environment.
Maybe I should do a blog piece on this.....
DJF