Investors rested yesterday after the huge advance on Wednesday, causing stocks to trade flat for most of the day. Neither a better-than-expected ISM manufacturing number, a worse-than-expected initial jobless claims report, nor a decrease in China’s PMI manufacturing figure had much impact on the day’s results.
The Dow Jones Industrial Average fell 0.21%, the S&P 500 lost 0.19% and the Nasdaq gained 0.22%. Volume fell to 855 million shares traded on the NYSE and 463 million on the Nasdaq. Decliners led advancers on both exchanges by about 1.5-to-1.
The S&P 500, along with the other U.S.indices, put on a show of strength on Wednesday as it vaulted through its 50-day moving average and now challenges the resistance line of a right triangle at 1,265. A pullback should receive support first at 1,220, and then the 50-day moving average (blue line) at 1,208.
Click to Enlarge
Click to Enlarge
We may be miles apart from Germanyand China, but when it comes to stocks these charts illustrate that there is a global cohesion. Note that each chart has formed a triangle with support approximately at the midpoint of the formation.
Also note that the MACD internal indicator of the S&P 500 and the German DAX have flashed buy signals, and that China’s Hang Seng’s fast line (red) of its MACD is arching sharply up and very close to issuing a buy signal. The Hang Seng, it appears, is slightly behind the other indices but gapped higher yesterday in an attempt to catch up.
The world’s currency for international settlements is the U.S. dollar. After three months of dollar strength and general stock weakness, the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) has pulled back slightly from its bearish resistance line (red dash) just over $22.40, but has found support at its 50-day moving average (blue line) at 21.92.
It is in an intermediate uptrend, and if it can close over the red dash line will confirm a new bull market. But a close under the blue line and the red dash support line should result in a test of its 200-day moving average (red line) at $21.60. Because of the inverse nature of stock to the dollar, this would likely result in an upward test of the resistance at S&P 1,265, as well as the resistance lines of the DAX and the Hang Seng indices.
Conclusion: Traders and investors alike should focus on the dollar’s daily moves since it is the key to the future direction of the world’s stock markets. (Whichever direction the market goes next, my colleague, Joe Burns, can help you capitalize on it.)
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.
