Watch the dollar–here’s why

Gary Kaltbaum is an investment advisor
with over 18 years experience, and a Fox News Channel Business Contributor. Gary
is the author of

The Investors Edge.
Mr. Kaltbaum is
also the host of the nationally syndicated radio show “Investors Edge” on over
50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s
Trendwatch”…a weekly and monthly technical analysis research report for the
institutional investor. If you would like a free trial to Gary’s Daily Market

click here.
888-484-8220 ext. 1.

We really needed to
start today with a chart of the almighty DOLLAR
. We do not know what
effect it will eventually have but we have our ideas. Very simply, and as we
have expected since its wicked breakdown ten days ago, the DOLLAR is plummeting…not
just going lower…but plummeting. We try to stay very technical with our words
but can’t help but wonder what is at hand and what the implications are going to
be down the road…but we promise you…they are not good. We have been
believers and have told you many times that our good buddy Greenspan sowed the
seeds of this by keeping rates ridiculously too low for too long to protect our
economy…when he should have just let things be. Because of this, we are
now dealing with a housing bubble, soaring commodities, soaring oil and a
plunging dollar. Ladies and gentleman, ultimately, this has the potential for a
powder keg. In the past week, the FED…now run by Big Ben Bernanke, almost said
that the raising of rates on the short end could stall soon. We would hate to
see what would happen if Big Ben had to raise rates to defend the dollar.

Hand in hand with the dollar is the BOND MARKET. The only good news is that for
the past couple of weeks, the drop has stalled. But any attempted bounce has
been about as anemic as can be. Oversold or not, BONDS are in a bear
market…but are due for a bounce…maybe. Any bounce will be sellable at this

In spite of what we see as a lot of fraying at the edges (and there is plenty),
all major indices continue to stay above short-term moving averages as well as
short-term support. Until these areas are broken, we will continue to give the
market the benefit of the doubt. Here are the numbers. We start with the NASDAQ
and NASDAQ 100 because they are closest to moving averages. (Thank you MSFT) The
NASDAQ’s 50 day average is at 2315 with short-term support at 2299. The NDX 50
day average is at 1688 with short-term support at 1684. The NASDAQ will not
turn longer-term bearish until it breaks 2232 and very long-term bearish if it
breaks 2189. The NDX will turn long-term bearish if it breaks below 1633.

First support on the DOW is 11,260 ,11,039…then 10,922 and more importantly at
10,661. There are stair steps of support on the S&P has it has built five higher
lows at 1295, 1280, 1268, 1253, and most importantly 1245. A break below 1295
changes the trend of higher lows and breaks the 50 day average. With all the
internal deterioration we have seen, it is crucial you watch these levels at
this juncture. So far, the major indices have been saved by good rotation out of
some groups and into others.

The TRANSPORTS continue to be strong while staying above moving averages…but
we are finally seeing a few leading names top out. Short-term tops are in place
in names like UNP, EXPD, BNI, CHRW, LSTR and LUV.

No problems with small-cap and mid-cap indices to address. We like the fact that
they all held the 50 day average on the latest pullback and will only start to
worry if those areas are breached.

WORLD MARKETS continue to do just fine. EUROPE is in pullback mode and needs to
be watched….especially the London FTSE. We would also watch the the 16,700
area for the JAPAN NIKKEI. A break below would take out its recent breakout.

UTILITIES held support at the October lows at 380. UTILITIES remain overall
bearish but a move above 403,25 would be its first bullish sign in a while. A
break below 388 ends any chance and a further break below 380 would be very

In our last report from Wednesday night, we told you the BIG BANKS were setting
up to break out. Well, it didn’t take long as they absolutely ramped on Thursday
and followed through on Friday. Just take a look at the charts of WB, WFC, BAC
and even C. Other FINANCIALS went along for the ride. We would love light volume
pullbacks into support for better entries at this time.

On the other end of the FINANCIAL spectrum, we are noticing distribution in the
BROKERS. We will actually go out on a limb ands say a couple of names have put
in tops while others may follow. We bring this group up because it may be a
proxy for the whole market. We start with MERRILL LYNCH as it broke the 50 day
average in a meaningful way for the first time in a year. Volume was very heavy.
When a stock breaks a moving average for the first time after holding it for a
long time, it could be meaningful. LEGG MASON is the worst of the group as it
broke on March 7th. Friday’s breakdown is potentially very negative as it is now
sitting at the longer-term averages. A break below and see ya. We will be
watching GS, LEH and BSC very closely this week. All dropped on Friday with

COMMODITY stocks remain very extended off of their recent moves and would only
look to buy only on pullbacks. Thursday’s action was amazing as most gapped down
on the news that China was raising rates…and then recovered some. We suspect
they are now going to trade with loads of volatility due to the extended

GOLD…WOW! Need we say more! Just keep in mind, risk picks up when the price of
GOLD is above $650 with the 50 day average at $575. Remember what we have taught
you. Everything eventually reverts back to moving averages. We just don’t know
if it is by pullbacks or stalling action.

Gary Kaltbaum