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Great data points! From a technical perspective looking at the USD, it appears to have broke below it's supporting trend line . There was a nice bullish divergence on the big picture chart at the lows of 2008 and price bounced but ended up getting caught in a wedge pattern for most of 2009 and 2010 and has since broken down. 2009 lows, here we come!
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After rallying through the first part of 2010 due to the sovereign debt problems in Europe, The $ began to decline despite the fact that those sovereign debt troubles have continued. A declining dollar tends to increase inflation, and decrease demand for dollar-denominated debt. At least for the time being, a declining dollar is good for stocks because it increases the value of exports and makes our products more competitive on world markets. However, the U.S.is a net importer overall, so the balance is clearly negative. Consumers are just beginning to feel the effects of lower income and higher costs, and inflation is onlyjust beginning to work it's way through the pipeline. At some point in time, if not already, businesses will also begin to feel the effects. While rising food costs may not be a concern for businesses, the rising cost of energy and raw materials will certainly have an effect on the bottom line.
Eventually, higher inflation and higher interest rates will surely not be good for stocks.
Last edited by tigertrader; April 11th, 2011 at 09:17 AM.
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The bulls must certainly feel that their attempt at new material highs is an exercise in futility as the ES ventured above 1330 for the seventh day in a row only to fail from that level again. The market then sold off and looked like it might hold Friday’s settlement @1324.00 only to sell off further and test major support near the weekly S1, daily 20EMA. 50% Fib extension, and upside gap. A lack of strong buying interest at these levels must have the bulls concerned that short term follow through to the downside may be forthcoming. However, they must have found some solace in the fact that the market didn’t close below the weekly S1. Alcoa, the largest U.S. aluminum producer, reported first-quarter profits that beat analysts’ estimates after prices rose for the lightweight metal, with little to no attendant market reaction to the news in extended hours trading. The fact the bulls are unable to mark up the market after the good news is not constructive for the market short term. Barring a gap up and run opening tomorrow, follow through selling will most likely become a reality.
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-> the figure for Europe is the gross debt, which makes it better
-> it is quoted in € not in $, which makes it worse
-> Europe's population is considerably higher, which makes it better
-> The income per capita is lower compared to the US, which makes it worse.
Europe is no better than the US. Humans are generally irresponsible, governments have further developed and cultivated irresponsibility, which is mirrored by the current state of the environment and public finances. There is only one thing worse than a human being, a group of them. Have bought the book "Crowds and Power" by Elias Canetti for my son. He is reading it now. The second key to understanding what is going on is game theory. Collective benefits are different from individual benefits. Moral hazard cannot only be used to describe the behavior of financial institutions, but is even more widespread amongst politicians.
Sell the $, or buy something which is quoted in $. I am astonished, for once I made it back to the topic, the Great POMO Rally.
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The weak hands threw in the towel yesterday after repeated attempts by the bulls to punch through and make new highs. The bears took the lead and the market sold off for the majority of the day, but was met by strong bull leadership near major support @ the weekly S3, daily RTH-only S3, Fib retracement and extension levels, daily 50EMA, and the monthly PP. The bounce continued into the ETH session and took out the previous sessions high @1315.50. 1320-22 is now critical resistance for the bears to defend. The bulls still enjoy the home field advantage as we are in the midst of earnings season, in what is still a cyclical bull market - the odds are the market is most likely to run on positive news rather than negative news. However, a rejection of 1320-22 points to at least a retest of yesterday’s lows and a possible break.
Support areas include: 13311.75 (VAh), the daily gap/pivot area, weekly S2 and closing VWAP, from 1309.75 to 1310.25 and 1308.25 to 1309.00, but likely not below.
Last edited by tigertrader; April 13th, 2011 at 11:01 AM.
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Long @1312.00 against the VAh - covered 1/3 of my position at the low of the opening email@example.com. Looking for the market to take out the high of the opg, range @1317.50 and test the R2 @ 1320.00 level. Planning to cover another 1/3 at that level, and hold the balance. Market internals are not strong enough to warrant pressing-and-adding to my position.