During the last week,  it has felt like the “the good old days” were back, as U.S. stocks opened higher in reaction to strong European markets and a weaker U.S. dollar. But will the dollar fall further and support the recent bounce in commodities and the broad market, or is this just another holiday bear trap? 

Despite support from a falling dollar, the S&P 500 has not been able to close above its 50-day moving average at 1,327. It just doesn’t seem able to bring in enough high-volume buyers to move through the resistance at 1,332. But a break above that number and the resistance line at 1,342 would change the picture and give buyers a reason to make big commitments. The internal indicators, like the stochastic, are oversold and ready to flash a buy signal, but until the resistance is overcome, we must go with the chart, which shows that the broad market is still in a correction.

The technology sector has been a drag on both Nasdaq and the S&P 500, and that’s been mostly because of the weakness in semiconductor stocks. But yesterday the semis, as represented by the Semiconductor HOLDRs Trust (NYSE: SMH), reversed field at just the last moment and closed above their bullish support line and 50-day moving average at $35. The stochastic is turning up, and that supports a move higher. But like the chart of the S&P 500, it needs to move into the resistance around $36 and mount an attack on the double-top at $36 to $36.50.

Commodities have had a nice bounce, and the Energy Select Sector SPDR (NYSE: XLE) shows a nice reversal from the double-bottom at $73. But like the other charts, the XLE must hold above the 50-day moving average and mount an attack on the double-top in order to turn the tide. The stochastic gave a buy signal on Wednesday, but is it just a signal that the rally is an oversold bounce or something more important?

The dollar’s weakness has been the most important driving factor in the recent commodity and stock market rally. The PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) shows the formidable overhead that the dollar has to overcome in order to keep its uptrend going. But it gapped above the 50-day moving average at $21.50, and that’s a positive for it and a negative for stocks. It would be a shock to the other markets if the dollar rallied and drove UUP through its resistance line at $22. But the stochastic is overbought and if the buck has another big drop driving UUP under the blue line, stocks could make a leap forward.

Conclusion: Until more evidence accumulates that the dollar is pulling back, the other markets will most likely hesitate just under their major resistance  lines. I’m cautiously bullish but would like to see more evidence that the dollar is headed lower before jumping onto the next train to greener pastures.

For one oil stock to buy, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.