Archive for June, 2010

U.S. Dollar Index Likely To Extend Higher Still

Posted in U.S. Dollar Index (DXY) on June 14th, 2010 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

After having already experienced a dramatic rebound from its lows, the U.S. Dollar Index (DXY) is in position to extend higher still. With technical studies bullishly aligned on long-term charts, the DXY is sitting just below key trend line resistance at 88.75. This set-up suggests that a “break” above 88.75 is a relatively good bet.

If it does, the “potential” for a move up to the “backside” of former support (now resistance) at 98 is a reasonable expectation to have. A wobbly Euro, a subdued British Pound and a depressed Yen are clearly the areas of weakness (in dollar terms) to focus on.

Of course, an extended rally in the dollar index (DXY) comes with a price to pay. Exports, in dollar terms, become less competitive with imports, possibly resulting in a drag on sales. Profit margins on domestic (U.S.) companies could become tighter, possibly resulting in limited net earnings expansion. And while inflation expectations would remain muted under this scenario, equity prices could well founder as investors look for additional signs of global growth.

In any event, the DXY does appear to be in position to make a new “leg” higher and could do so soon.


The S&P 500 Index Closes Below Key Support

Posted in The S&P 500 Index (SPX) on June 6th, 2010 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On the heels of May’s disappointing jobs report, equity prices tumbled on Friday resulting in the S&P 500 Index (SPX) closing below key “mid-channel” support on weekly bar charts.

Until Friday’s sobering employment data, equity markets appeared to have the luxury of shaking off Europe’s expanding financial woes, troubling events in the Middle East, serious saber rattling in North Korea, and the on-going oil disaster in the Gulf of Mexico. Worries over a possible housing bubble in China also were also set aside.

An improving U.S. housing market and better than expected retail sales for the year so far had optimists anxious for more evidence of an economic upturn. The details of Friday’s employment picture however, which included a scant increase of only 41,000 new jobs in the private sector and a rise in an alternate measure of unemployment from 16.6% to 17.1%, left even the optimists concerned. In addition, unexpected remarks from a spokesman for Hungary’s new prime minister also soured the session after he described that country’s economy as being in a “grave” situation.

In any event, Friday’s loss of appetite to buy stocks caused the S&P 500 Index to settle at 1,064.88, which was well below key upward sloping “mid-channel” support now seen at 1,079. In the absence of oversold conditions, the “risk” is for a potential extension down to its projected “channel bottom” support now sitting near 939.