Stocks dribbled lower on Monday as buyers paused for breath after a strong finish at the end of last week. In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq lost 0.5%, and the Russell 2000 lost 0.9%.
News flow was relatively light, with corporate actions in focus from the announcement that Hewlett-Packard (HPQ) would break itself into two entities to the surprise bankruptcy of GT Advanced Technologies (GTAT) after Apple (AAPL) decided to not add the firm’s sapphire displays to its new iPhone 6 models. Ebola, Hong Kong protests, a typhoon in Japan, and an election in Brazil rounded out the headlines.
But it was the action in the foreign exchange markets that was the day’s real highlight as the U.S. dollar suffered its largest drop in a year, boosting beaten-down commodities including crude oil and precious metals. The greenback lost 1.1% as it nearly washed away all the gains from Friday’s surprisingly strong September jobs report.
The dollar had been on a tear lately, and the rise was looking unsustainable. Last week was its 12th consecutive weekly gain that took the greenback to levels not seen since 2010.
As a result, the iShares Silver Trust (SLV) pushed up and out of its most oversold condition since 2008 and looks ready for, at the very least, a recovery rebound to its 50-day moving average — which would be worth a 10% gain from current levels. In response, I’ve recommended the Nov $17 SLV calls to my Edge Pro subscribers.
Crude oil also enjoyed some relief, rising back above the $90-a-barrel threshold.
As for stocks, the NYSE Composite Index — a broader measure of the market than the more closely followed Dow Jones Industrial Average — is threatening to fall back below the critical support at the 200-day moving average. It closed below that level on Wednesday and Thursday last week, breaching supporting that hadn’t been broken since the current uptrend phase started in late 2012.
A failure to hold this level — heading into the Q3 earnings season and the looming decision from the Federal Reserve to ends its QE3 bond purchase program later this month (the September Fed meeting minutes are due this Wednesday) — would signify that the last two days represented a dead-cat bounce ahead of deeper, more painful losses for a market that hasn’t suffered a significant pullback in two years.
More From InvestorPlace
- 5 Big-Momentum Tech Stocks to Sell
- Dave & Buster’s Leads 8 New Stocks to Watch
- The Best and Worst Funds for Rising Interest Rates
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.
