It Used to Take Cash to Move Equity Markets Higher
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The SPX short-term trend had turned down from the 1080.15 high on the 9/23 key time date, and in the commentary for 10/2, I said that there was support at the 50DEMA (1017.61), and the 1018 high which preceded the pullback to 978.54, followed by the 1014 .382RT to 1576 from 667.
I also said that day traders should look for a bounce that day if the opening “jobs report” decline accelerated. The bottom line is that the SPX hit 1019.95 on the opening bar, down from the previous 1029.85 close, and the bounce carried the SPX to a 1025.21 close. The 4-day MAs of the volume ratio and breadth became ST-O/S at 32, and -917.
The bounce continued yesterday with the SPX finishing +1.5% to 1040.46, led by the commodity sectors, and also the financials, which were upgraded by GS, which is a very interesting coincidence. The $US dollar accelerated the advance yesterday in the major indexes and commodity sectors, as the USD was -0.5. My view has not changed in that I expect this short-term trend to trade lower after this bounce from the 50DEMA zone.
The USD (US Dollar Index) was +0.4% at 7:00 AM this morning, and that had the SPX futures +10 points, in addition to crude oil above $71, and also gains in the other commodities. As I complete this at 8:50 AM, the SPX futures are +8 points, so the odds obviously favor another $US dollar induced gap up opening.
It used to be that cash from buyers was all that was needed to take stocks higher, but now Programs and the $US dollar are the prime movers, in addition to ETF stock buying by the Trusts. However, if this Administration keeps printing money to purchase bonds, in addition to the $trillion dollar deficits, coupled with the biggest tax increases in history, we could be looking at a $US Dollar crash down the line, and then there will be no more correlation of a declining dollar and a rising equity market, but the odds for bread lines in the U.S. will significantly increase as foreign investors sell our bonds and interest rates skyrocket.
Have a good trading day!
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