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MARKET WRAP UP 10/26/10
Stocks finished virtually unchanged, and in the case of the S&P 500 literally unchanged, as that key index closed once again at 1185. The bears had a brilliant opportunity to capitalize on the series of bearish shooting star candlesticks that were printed yesterday on a variety of daily charts, but they were unable to do anything more than growl. The bullish action was in the oil space, as well as the marquee names in the Nasdaq Composite, such as $NFLX and $DECK.
Even with a stronger U.S. Dollar, the bears could not use that tightly correlated inverse relationship to push equities down. Clearly, the Dollar is in a steep downtrend, and, generally speaking, the weakness in the currency has been seen as a major reason for the rally in equities since September. As the daily chart of the Dollar index illustrates below, one would think with the recent stabilization in the Dollar that stocks would weaken. Instead, they have gone sideways at best.
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Even if the Dollar breaks above the 20 day moving average, to automatically assume that the rally in equities will end may be too conclusory. When a highly correlated relationship between asset classes becomes too obvious, Mr. Market has a tendency to surprise those who presume that a certain trade is a slam dunk. Of course, the Dollar is something that commands respect from traders looking to gauge the direction of equities, but it is important to resist the urge to assume that you have cracked some kind of code by merely glancing at a currency.
Despite the multitude of robots and programs that individual traders are competing against today, there remains no substitute for discipline and a consistently strong work ethic in order to get a true sense of the market and the best individual trading opportunities.
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The catch today was bonds (keep TLT overlayed on my Russel and S&P charts intraday and watch it squeltch gains in the dollar)…if bonds cooperate this mkt will folllow the correlation you talk about above, especially with the unrelenting run in the rearview mirror (andbegrudgingly for me, possibly ahead). Bonds could be collapsing here and the money needs to go somewhere, that somewhere is stocks…seems too easy, but it won’t get buried at banks earning nothing…love the work chess, thanks
Thanks, Kevin.
So:
-weak dollar stocks up
-strong dollar stocks even to up
-bad economic data stocks up (QE!)
-good economic data stocks up (who needs QE but it would help)
Basically stocks up no matter what.
I think I will break down and get the PPT, I hope I don’t need some kind of crazy system requirements as I keep my setup pretty basic.
GYSC,
That is great! I look forward to seeing you inside The PPT. A basic computer system is all you need for The PPT to work–no fancy additions.
Tech Stocks up big after hours…Broadcom beat…could be rockin’ Thursday on the Nazty Naz.
Yeah, that BRCM was huge. Interesting to see whether after-hours gains will carry over into tomorrow.
Chess-
Love you like my own kin, man, but a comment like
Until the bears show they can take the initiative, the trend remains higher
is like saying
Until the trend turns lower, the trend remains higher.
Doesn’t really say anything.
Maybe not to you, but think about how many people go against that simple phrase and lose tons of money in fighting the trend?
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