Archive for May, 2010

Sunday, May 30th, 2010

The USA is not the utopia that it used to be just a couple of years ago. Then again, most homes do not look like “the Beaver’s” home, where his mom wore a dress, apron and stayed home to care for the family. We ventured into a local Maryland McDonalds and found, to our complete amazement, that it looked more like a senior center than a fast food restaurant. Yes, there were some kids, but most of the patrons were seniors all dress up in different unrelated groups having an outing. Is this what it has come to, that our seniors can’t afford more than McDonalds? Beyond Europe’s southern problems we have problems on our own shores which we need to address. One of these problems is the care and dignity of our senior population. Just remember, you too will be a senior one day, and although you may scoff at it now, you may regret not dealing with the problems now, when you have the opportunity to do so. On the brighter side, we also noticed that guides and workers at museums, zoos, and aquariums were seniors. Great to see a huge resource put to work.

The US Dollar index has enjoyed a wonderful run from the depths of despair to the elevated honor of holding the title of the least bad currency. Money has been returning to the US Dollar because of its perceived safety. Thus we would have expected to see some of this lose cash return to our markets. Well, maybe it has, then again; maybe it continues to be a bit scared. So what is the result of the perceived melt down in Europe? Actually, you can look at it as putting a lid on some cost, like fuel. You might say that it will hurt our trade, not really because trade to that region of the world was not that wonderful anyway. True it is bad to lose even one order especially when you are running trade deficits. The other negative to the strong US Dollar is that tourism will retreat, but then again, we Americans can afford breakfast at McDonalds in Berlin. There came a time in the not so distant past that many Americans traveling abroad would travel with meal replacement bars in the suit cases so that they could avoid having to pay a fortune for meals like lunch and breakfast. Another side of a strong US Dollar is that commodities, priced in dollars become cheaper for us while the weaker currencies feel increased costs.

This week will be an important week for both the US Dollar index and for the S&P 500. Should the US Dollar index close below 85.32, it will find little support until it visits 83.07. On the other hand, should the US Dollar trade above 87.52, it will melt up as any existing shorts cover their positions. We will have a warning if the US Dollar cannot rally above 86.75. The uptrend line is at 84.38 and the downtrend line is at 87.25. The US Dollar index is above the Ichimoku Clouds for all time-frames. The 5-day moving average is at 86.666. The top of the Bollinger band is at 85.501 and the lower edge is seen at 82.96.

The S&P 500 has an interesting chart. We note that the latest downdraft seen on May 25, 2010 or 1036.75 did not exceed the previous downdraft of February 5, 2010 when the index printed 1036.25. We agree that this test of that low was a marginal positive for the market, but right now, the market will take a positive where it can find it. On Tuesday we had a nine-count on the S&P500. The 5-day moving average is at 1078.95. The top of the Bollinger band is at 1200.90 and the lower edge is seen at 1043.84. We are below the Ichimoku Clouds for both the daily and the monthly time-frames. We are above the clouds for the weekly time-frame. The stochastic indicator is curling over but has not issued a sell-signal. Our own index is identical to that. The RSI is pointing to lower levels and the Thomas DeMark Expert indicator continues to point higher. The downtrend line is at 1128.84 and the uptrend line is at 1076, both for the Tuesday session.

The NASDAQ 100 has performed better than the other indices that we follow in this report. The lose in the Friday session was only 0.63% while the decline in the S&P 500 was 1.14% and the decline for the Russell 2000 was 1.08%. The downtrend line for the Tuesday session is at 1910.81. The uptrend line is at 1794.25. The 5-day moving average is at 1827.05. The top of the Bollinger band is at 2020.51 and the lower edge is seen at 1761.35. Both the stochastic indicator and our own indicator are curling over to the downside but have not issued a sell-signal. The RSI is pointing lower. We are below the Ichimoku Clouds for the daily, above the clouds for the weekly time-frame and in the clouds for the monthly time-frame. We would expect to see this index lead to the upside, when that upside arrives. This week we have fresh funds entering the market as we see 401K money and other monthly retirement money find investments.

The Russell 2000 retreated in the Friday session. The 5-day moving average is at 649.04. The top of the Bollinger band is at 732.98 and the lower edge is seen at 621.40. The stochastic indicator and our own indicator are both curling over to the downside but are not issuing a sell-signal at this time. The RSI is pointing lower and the Thomas DeMark Expert indicator is pointing higher. It is interesting to note that in all the indices we seem to be seeing some divergence. Take a look at most any oscillator and notice that during the recent downdraft, the oscillator was higher than it was on not so deep a retreat. Naturally when we see this we should look more carefully at the index and its action. A divergence is not a signal to go long or short but rather a warning shot that something is changing. The downtrend lines are at 702.76, 678.60 and at 669. We do see good support at 652.50, should we retreat. We see resistance at 672. We are in the Ichimoku Clouds for the daily time-frame and above the clouds for the weekly time-frame.

Crude oil rallied back with a vengeance from the May 20th session. We are back inside the original trading range. Our own indicator and the stochastic indicator are both curling over but not issuing a sell-signal. We are below the Ichimoku clouds for the daily time-frame and in the clouds for both the weekly and the monthly time-frame. The 5-day moving average is at 71.79. The top of the Bollinger band is at 83.57 and the lower edge is seen at 64.66. Crude oil seems to be a proxy for those believing in this recovery. The more we recover, the more we will need crude oil to fuel the expansion. For those skeptical about the recovery, there would be no reason to expect crude oil to rally much further. After all, it is a matter of supply and demand. Time will give us the answer so be patient.

Gold will have a point of inflection in the Tuesday session. We caution you to go with the trend and not to fight it. The indicators are not going to help you with this one. The downtrend line is at 1215.86 and the uptrend line is at 1198.50, these lines meet on Tuesday at 1211.50. The 5-day moving average is at 1205.90. The top of the Bollinger band is at 1243.69 and the lower edge is seen at 1164.94. We are above the Ichimoku Clouds for the daily and the weekly time-frame.