DOLLAR BOUNCE GETS STOCKS OFF TO A GOOD START -- BONDS AND GOLD FALL
DOLLAR RALLIES AGAINST THE EURO... The dollar is having a good day against the Euro. Chart 1 shows that the Euro is having its biggest daily drop in three weeks. While this doesn't reverse the uptrend in the Euro (and the downtrend in the dollar), it is setting a positive tone for stock markets today both in the U.S. and in Europe. Monday buying in the dollar and stocks is causing profit-taking in gold which is down $4.60 today. The market may also be benefitting from an 86 cent drop in the price of crude oil. Weakness in those two commodities is causing gold and energy stocks to be among today's weakest stock groups. With stocks advancing, bond prices are falling. That's pushing bond yields higher. Rising bond yields are normally associated with rising stock prices. Chart 2 shows the 10-year T-note yield gapping higher this morning.
Chart 1
Chart 2
STOCK AVERAGES BACK OVER 50-DAY LINES... Charts 3 and 4 show the Nasdaq and the Dow climbing back over their 50-day averages today. Although the MACD lines are still negative, daily stochastic lines are turning up from oversold territory under 20. We'll be watching this afternoon to see if the morning's price gains hold through the afternoon. We'll also be watching to see if volume picks up this afternoon. Price bounces carry more credibility when they're accompanied by rising volume. Sector patterns are also encouraging today. Technology is leading the market higher, followed by Consumer Discretionary stocks and Industrials. Today's laggards are Energy and Financials.
Chart 3
Chart 4
