Stronger US dollar = weaker stocks. Today the US dollar gained against the Euro and stocks closed lower. I wrote about this relationship here Weaker Dollar = Higher Stocks. But now the opposite is happening, which is a stronger dollar is having the effect of pushing stocks lower. Below is a chart that shows this non-correlated relationship.
The S&P 500 has broken prior support and is heading down to the 200 day moving average. That should be a good test for this market. Also at the 200 dma is another support low for this year. A break of that level with the markets as oversold as they are, would be a big negative for stocks.
Bottom Line: The markets are down -6.9% from this years high, but still higher for the year +1.47%. In the short term the S&P 500 is very oversold, but I think a test of the 200 dma is in the works. We would not be putting any cash to work until there are signs of a successful test of prior support (or 200 dma) or a confirmed trend reversal. Thank you for reading.
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