OCT 28 INDEX UPDATE
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With Friday's bullish action in the market, specificly the DOW and SPX, many/media/analysts are feeling that a bottom has been set.
I too feel that last week also reconfirmed that a mid-term bottom was previously set. Last week another successful retest was made on the NAZ, but the NDX was slightly pierced to the downside. Im only talking about a MID-TERM BOTTOM(30 days), until mid-NOVEMBER. After mid-NOVEMBER, Im still looking for clues.
The question is whether this is a MAJOR BOTTOM. Where many are started to feel that this is a MAJOR BOTTOM, Im not so sure in light of the high U.S.DOLLAR.
US DOLLAR - tfc-charts.w2d.com
EURO - tfc-charts.w2d.com
Per those charts its obvious that the US DOLLAR is in a major UPTREND and the EURO is in a major DOWNTREND. So the question is how much higher for the US DOLLAR. Right now there are some indication of a short-term TOP but no strong indication of a MAJOR TOP yet, not to say that this short-term top could not turn into a MAJOR TOP, just too early to say. My guess is that the US DOLLAR is nearing a MAJOR TOP, but I also said that when it was around 110, last week it got close to 119.
Regardless of where the exact top is in the U.S.DOLLAR, once the U.S.DOLLAR drops that would be a strong negative for our stock markets. If the drop in the DOLLAR is strong enough, where other currencies like the EURO/YEN are rising, we will see an out-flow of foreign money. Again thats if the DOLLAR drops enough. Where is that exact point on the DOLLAR, I dont know, but as a guess if the dollar was to drop 10% we could see the outflows start with significance.
Im no expert in economics but I am aware that many European companies which rely on exports have been doing better in light of less competition from the U.S. With the high U.S.DOLLAR, it is very hard for American exporting companies to compete with foreign companies, especially those from the EUROPE. Since I was from the shipping industry, I just checked with my buddies still in the industry and they are telling me that all we are exporting are the lowest value cargoes such as waste paper, paper products, tin-plate, metal scrap, cheap chemicals(resin), etc. The good value cargoes like road building equipment/machinery/cooling apparatus/airplanes/etc are simply not moving since the cost from European manufacturers are much cheaper in light of the high DOLLAR/low EURO. The EXPORTS from Europe are doing great.
So the strong DOLLAR is definitely helping EUROPEAN/FOREIGN companies which rely on their exports. So as these European companies are doing better, it has to be helping their economy in some ways and may even be narrowing the gap with the U.S. Im not saying that the U.S. will be over-taken in any manner, just that the gap may be narrowing.
So if the DOLLAR does weaken enough, we could easily see an outflow of foreign and even domestic money into foreign markets where their industries are now starting to pick up due the current HIGH DOLLAR.
When will this happen, I dont know. But to ignore that possibility that eventually the DOLLAR will drop may not too wise.
Depending on how much the DOLLAR drops, when it does, that could be the key for whether our stock market sets NEW LOWs. If the DOLLARs drops alittle - maybe no problem at all, but if it drops alot - WATCH OUT!!!
Dont assume that the DOLLAR cant drop alot, just like the many who assumed in the past that the NAZ would be around 6000 right now/years end. |
