Transcendental Market Fragments:
The Market:
A sign of insecurity is the massive flow of money into big blue chip stocks at the end of a bullish run and that's exactly the kind of flows I'm seeing now.
Dow Industrials:
Within the Dow, many of the largest-priced stocks - the ones which carry the most weight in the price-weighted average - are seeing very positive money flow.
Money is still flowing into AXP, BA, DD, XOM, HPQ, IBM, KFT, KO, MCD, MMM, and UTX.
Broad Market:
While the big blue chips continue the heavy lifting, the broad market trend is, at best, seen as neutral. The Value Line Index failed to make a new high on the last rally and the fact that the last rally was exactly equal in time to the preceding decline confirms the overall trend is neutral. Since the trend had been rising from the March low, this suggests that the market either already has seen the high of the bear market rally (likely) or will see it during the seasonally-strong period of time in December.
NYSE Composite:
The market has been working its way back to the 50% retracement price. The NYSE Composite Index hasn't quite reached it yet (around 7300), but it remains strong overhead resistance.
The net accumulation-distribution line remains in distributional territory as the recent bounce, which did score a price high, was not able to move above the zero line.
Dollar Index:
The US Dollar Index continues to act like it's forming a bottom here.
This is consistent with the Euro topping, of course. The Euro is in poor shape and it's amazing that it has been able to hold up near 1.50 for so long. Undoubtedly, the Fed has something to do with the strength in the Euro.
The long term trend in the Euro is down and this entire rally has been a countertrend move.
With short term interest rates in the US at zero, the Dollar Carry Trade is being neutralized by the fact that those central banks which have raised their short term rates are putting their exporters out of business. Those nations will be suffering due to their overly-tight monetary policy and are likely going to be forced to cut interest rates to avoid a dip into recession. This will help unwind the dollar carry trade and push the US Dollar substantially higher. |
