Archive for January, 2012

Dow Jones Industrial Average Nearing Key Resistance Zone

Posted in Dow Jones Industrial Average (DJI) on January 28th, 2012 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

Despite disappointing quarterly reports from the likes of Google, American Express and Capital One, better-than-expected results from IBM, Microsoft and Intel helped power the Dow Jones Industrial to a 298.40 point gain or a 2.4% jump for the week. Adding to the upbeat mood was an unexpectedly sharp drop of 50,000 in initial jobless claims, the biggest drop seen in six years. A pullback in energy prices, particularly natural gas was also seen as a plus for consumers.

Although negotiations between the government of Greece and experts representing the private banks and investors (designed to reduce the Greek debt burden) remain unresolved, stronger-than-expected demand for short-term Spanish and Italian sovereign debt issues last week were clearly welcomed by investors. That was evidenced by a modest rebound in the Euro, as well as a decline in the U.S. Dollar Index (DXY), which it turn helped to lift U.S. equity prices at the expense of pushing domestic bond prices lower.

In any event, the Dow Jones Industrial Average is now approaching a test of an important technical zone that now sits between 13,650 and 13,750. With overbought conditions at hand on weekly charts, a move above this area does not appear to be a good bet over the near-term. On the contrary, it might prove to be a key sticking point with a number of potentially upsetting political events currently on the horizon. The resumption of the battle over the payroll tax relief extension plan, a more muddled Republican Primary picture heading into Florida, combined with worries over this week’s longer-dated German and Dutch debt auctions absent a resolve to the Greek debt crisis could team up to cause investors to take a pause.

U.S. Dollar Index Positioned To Move Solidly Higher

Posted in U.S. Dollar Index (DXY) on January 20th, 2012 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

On the heels of a number of significant downgrades on European debt by Standard & Poor’s rating agency on Friday, the U.S. Dollar Index (DXY) appears to be in position for a possible test and likely break above key downtrend resistance currently sitting at the 82 level.

Although many investors had expected downgrades to occur, the impact of these downgrades along with the breakdown of talks between Greece and a number of creditors trying to negotiate a restructuring of its debt could propel the DXY even higher.

If the U.S. Dollar Index were to break above the 82 resistance level, a move up toward key resistance in the 87 area could ensue. In turn, a corresponding move could force yields on U.S. Treasury 10-year notes to move solidly lower and toward a key technical level sitting near 1.40%. Moreover, a likely “risk off” stance by investors could send the S&P 500 index (SPX) sharply lower as well.

If this scenario were to play out over the intermediate-term, a longer-term outlook on the DXY could envision an eventual move toward the 100 area, where the “backside” of former trend line support (now resistance) currently sits. The implications of such a move would carry overtones of a deflationary environment, a condition that Federal Reserve Chairman Ben Bernanke is trying to avoid. Thus, recent hints of another round of quantitative easing (QE) would likely be realized in theU.S.along with additional attempts by the ECB to stoke stimulus inEurope.