I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Monday, August 10, 2009

SPX Rally Still Unconfirmed, Dollar Looks Like It Wants to Give the Bears Some Smelling Salts

Smelling salts, maybe some honey laced with a little steroids, something.... Or perhaps a "strengthening" US Dollar**. But besides some macroeconomic trends that are turning against the bulls currently, the fact that the move on the SPX and INDU are non-confirmed by the COMPQ and NDX (the leaders of the rally off the bottom), should give them pause

Short term is all noise. And the current dollar weakness is fueling the equity rally. Long term, equities will go down (due to poor fundamentals) and the dollar will go down (due to confidence crisis) together (such as 2007-2008 and numerous other occasions)

Take a look at the charts below. All of the subsequent rally since Aug 4 as been outside the 2-4 channel of Wave A. Couple that with an examination of the NDX (which is "way off the reservation" with regards to the channel), this rally should make any honest trader deeply suspicious of this rally

The Dollar is putting in a very convincing short term bottom here. 77.5 on the USDX is major support. If that gave way, things would have turned really ugly really quick (for the dollar). But I made a double bottom around 77.5-77.4 and also ended a 5-wave run. Condition look ripe for a bullish correction in the dollar that should last for a few weeks. Enough to throw some ice-water on this equity rally.


  1. Nice blog
    Just came across it today
    I will be back

  2. Excellent Jman, Thanks! You are welcome anytime :)