TECH STOCKS REBOUND -- DOLLAR DROPS NEAR TWO-YEAR LOW AS PRECIOUS METALS SURGE -- FOREIGN ETFS REBOUND
REBOUND IN NASDAQ 100 STEADIES MARKET... Stocks are opening the week on a firmer note. A rebound in tech stocks is one of the reasons why. Last Thursday's high-volume selloff in tech stocks caused some nervous profit-taking as the week ended. Chart 1 shows the Nasdaq 100 (QQQ) holding initial chart support near 252 and trying to regain its 20-day moving average today (green line). The five big tech stocks that dominate the QQQ (and the tech sector) are in the black today. Last week's heavier downside trading remains a concern, however; and it remains to be seen if today's tech rebound has staying power. Other stock indexes also remain above support levels. The biggest story of the day, however, is the continuing drop in the U.S. Dollar and the resulting surge in precious metals.
DOLLAR INDEX NEARS TWO-YEAR LOW... The decline in the U.S. dollar is becoming a lot more serious. The weekly bars in Chart 2 show the U.S. Dollar Index (plotted through Friday) ending at the lowest level in nearly two years. In addition, its blue 10-week average has fallen below its red 40-week average (blue arrow) which is another bearish sign. Its weekly MACD lines in the upper box have fallen to the lowest level in two years. The USD is down again today against all major foreign currencies. Its monthly chart also looks toppy.
DOLLAR DOUBLE TOP?...The monthly bars in Chart 3 show two prominent tops in the Dollar Index formed earlier this year and the end of 2016 (red circles). That raises the possibility of a bearish "double top" formation in the USD. In addition, the USD is nearing a test of a rising nine-year trendline drawn under its 2011-2018 lows. A significant drop below that rising trendline could signal the end of the decade long dollar uptrend. Its monthly MACD lines in the upper box have turned negative as well. That's obviously bullish for foreign currencies which are rising against the greenback. But it's also bullish for precious metals which are surging again today.
GOLD HITS NEW RECORD... Gold is up 2% today and trading in record territory with even bigger gains in its miners. Silver and its miners are experiencing an even stronger day. Recent messages have pointed out that the cheaper gray metal is rising faster than the more expensive yellow metal. Another side effect of a falling dollar described in last Wednesday's message is that it boosts foreign stock ETFs priced in a weaker dollar. Foreign developed and emerging market ETFs are having a strong day with bigger gains in the eurozone and Asia.
