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Sunday, August 23, 2009 5:43:50 PM
Amateur Investors Weekend Market Analysis (8/22/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_Aug_22_09.htm
As I mentioned last weekend the market is being driven by the US Dollar (USD). For the last several years there has basically been an inverse relationship between the USD and the major averages such that weakness in the USD (points A to B) has been followed by strength in the major averages (points C to D) while strength in the USD (points B to A) has been followed by weakness in the major averages (points D to C). This inverse relationship has continued in 2009 as the USD peaked in March as the S&P 500 made a bottom which has been followed by a 54% rally in the S&P 500 during the past 6 months.
In addition even on a shorter timeframe over the past month you can see the same inverse relationship between the USD (blue line) and S&P 500 (purple line).
The bigger question is will the USD continue to fall or is it nearing a potential bottom? As I have pointed out before there was a clear 5 Wave move down from the peak in the Summer of 2001 to the bottom in early 2008 and the rally from early 2008 through early 2009 could be defined as Wave A of a corrective ABC type rally. The latest move down could be Wave B which has retraced 61.8% from the March peak. If we are seeing an ABC type pattern developing then Wave C should develop this Fall which could eventually see the USD rally back into the 90's at some point in 2010. Thus if the inverse relationship between the USD and the major averages would continue in the future then a substantial rise in the USD would likely have an adverse impact on the major averages in the longer term.
Meanwhile the alternative scenario is that the USD continues to get sold off through the end of the year with an eventually retest of the early 2008 low which was in the lower 70's. If that were to occur then that would likely have a positive affect on the major averages through the end of the year.
Meanwhile another thing to watch is the price of Crude Oil. Looking at a chart of Crude Oil it appears to be developing a longer term Head and Shoulders Top pattern. If the price of Crude Oil rallies back to the upper 70s that would be a 38.2% Retrace from the peak near 150 to the bottom which was in the mid 30's and would allow for the development of the 2nd Shoulder.
Also keep in mind there has been an inverse relationship between the price of Crude Oil and the US Dollar (USD) in the past as well. When Crude Oil has rallied (points E to F) the USD has fallen (points G to H) and when the price of Crude Oil has fallen (points F to E) the USD has risen (points H to G). Thus if the Head and Shoulders Top pattern were to pan out with an eventual drop in the price of Crude Oil then that would likely lead to a rally in the USD.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2008 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
Our Summer Membership Special for new Members is shown below
which are 50% Off our normal Monthly Rate of $39.95
http://www.amateur-investor.net/Weekend_Market_Analysis_Aug_22_09.htm
As I mentioned last weekend the market is being driven by the US Dollar (USD). For the last several years there has basically been an inverse relationship between the USD and the major averages such that weakness in the USD (points A to B) has been followed by strength in the major averages (points C to D) while strength in the USD (points B to A) has been followed by weakness in the major averages (points D to C). This inverse relationship has continued in 2009 as the USD peaked in March as the S&P 500 made a bottom which has been followed by a 54% rally in the S&P 500 during the past 6 months.
In addition even on a shorter timeframe over the past month you can see the same inverse relationship between the USD (blue line) and S&P 500 (purple line).
The bigger question is will the USD continue to fall or is it nearing a potential bottom? As I have pointed out before there was a clear 5 Wave move down from the peak in the Summer of 2001 to the bottom in early 2008 and the rally from early 2008 through early 2009 could be defined as Wave A of a corrective ABC type rally. The latest move down could be Wave B which has retraced 61.8% from the March peak. If we are seeing an ABC type pattern developing then Wave C should develop this Fall which could eventually see the USD rally back into the 90's at some point in 2010. Thus if the inverse relationship between the USD and the major averages would continue in the future then a substantial rise in the USD would likely have an adverse impact on the major averages in the longer term.
Meanwhile the alternative scenario is that the USD continues to get sold off through the end of the year with an eventually retest of the early 2008 low which was in the lower 70's. If that were to occur then that would likely have a positive affect on the major averages through the end of the year.
Meanwhile another thing to watch is the price of Crude Oil. Looking at a chart of Crude Oil it appears to be developing a longer term Head and Shoulders Top pattern. If the price of Crude Oil rallies back to the upper 70s that would be a 38.2% Retrace from the peak near 150 to the bottom which was in the mid 30's and would allow for the development of the 2nd Shoulder.
Also keep in mind there has been an inverse relationship between the price of Crude Oil and the US Dollar (USD) in the past as well. When Crude Oil has rallied (points E to F) the USD has fallen (points G to H) and when the price of Crude Oil has fallen (points F to E) the USD has risen (points H to G). Thus if the Head and Shoulders Top pattern were to pan out with an eventual drop in the price of Crude Oil then that would likely lead to a rally in the USD.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2008 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
Our Summer Membership Special for new Members is shown below
which are 50% Off our normal Monthly Rate of $39.95
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