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Sunday, November 22, 2009 8:15:30 PM
Amateur Investors Weekend Market Analysis (11/21/09):
http://www.amateur-investor.net/Weekend_Market_Analysis_Nov_21_09.htm
Since 2002 there has been basically an inverse relationship between the US Dollar (USD) and the Equities. When the USD has trended lower (points A to B) the Dow has risen (points C to D) and when the USD has rallied (points B to A) the Dow has fallen (points D to C).
However when we look at a longer term chart of the USD and the Dow going back to the 1970's this inverse relationship hasn't always worked. Notice from the mid 1990's through 1999 both the USD and the Dow trended higher (points E to F). Meanwhile from the mid 1970's through 1980 both the USD and the Dow generally trended lower (points G to H). In addition when the Dow bottomed in the early 1980's both it and the USD rallied together (points I to J). Thus although the inverse relationship between the USD and the Dow has worked since 2002 it hasn't always been that way in the past.
As far as the major averages the Dow and S&P 500 have been making a series of higher highs and higher lows during the past 19 weeks after putting in a bottom in early July. If this pattern is going to continue as we end the year then the Dow should hold support above the 9800 level if it makes another higher Low.
As for the S&P 500 if it pulls back and makes a higher Low then it should hold support above the 1040 level.
Meanwhile the Nasdaq broke its previous pattern of making higher Lows back in early November as it dropped below the early October low.
With the Nasdaq making a new high this week after making a lower Low this has set up a potential Broadening Top pattern as I talked about last weekend. This chart pattern consists of 3 higher highs (Waves 1, 3 and 5) while the 4th wave makes a low lower than Wave 2. Once the pattern completes then a reversal of the trend occurs.
The chart of the Nasdaq shows that it has now developed a similar Broadening Top pattern with the new highs made this week. Now in order for it to be confirmed the Nasdaq would have to break below the 2010 level in the weeks ahead.
Finally keep an eye of Goldman Sachs (GS) as there is a divergence developing between it and the S&P 500 as the S&P 500 made a higher High while GS may have peaked back in mid October (point A). The reason why I point this out is that in late 2008 GS bottomed out (point B) several weeks before the S&P 500 did (point C).
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to the following products.
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's and SPY's.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account.
3. The "End of Month Strategy". 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.
http://www.amateur-investor.net/Weekend_Market_Analysis_Nov_21_09.htm
Since 2002 there has been basically an inverse relationship between the US Dollar (USD) and the Equities. When the USD has trended lower (points A to B) the Dow has risen (points C to D) and when the USD has rallied (points B to A) the Dow has fallen (points D to C).
However when we look at a longer term chart of the USD and the Dow going back to the 1970's this inverse relationship hasn't always worked. Notice from the mid 1990's through 1999 both the USD and the Dow trended higher (points E to F). Meanwhile from the mid 1970's through 1980 both the USD and the Dow generally trended lower (points G to H). In addition when the Dow bottomed in the early 1980's both it and the USD rallied together (points I to J). Thus although the inverse relationship between the USD and the Dow has worked since 2002 it hasn't always been that way in the past.
As far as the major averages the Dow and S&P 500 have been making a series of higher highs and higher lows during the past 19 weeks after putting in a bottom in early July. If this pattern is going to continue as we end the year then the Dow should hold support above the 9800 level if it makes another higher Low.
As for the S&P 500 if it pulls back and makes a higher Low then it should hold support above the 1040 level.
Meanwhile the Nasdaq broke its previous pattern of making higher Lows back in early November as it dropped below the early October low.
With the Nasdaq making a new high this week after making a lower Low this has set up a potential Broadening Top pattern as I talked about last weekend. This chart pattern consists of 3 higher highs (Waves 1, 3 and 5) while the 4th wave makes a low lower than Wave 2. Once the pattern completes then a reversal of the trend occurs.
The chart of the Nasdaq shows that it has now developed a similar Broadening Top pattern with the new highs made this week. Now in order for it to be confirmed the Nasdaq would have to break below the 2010 level in the weeks ahead.
Finally keep an eye of Goldman Sachs (GS) as there is a divergence developing between it and the S&P 500 as the S&P 500 made a higher High while GS may have peaked back in mid October (point A). The reason why I point this out is that in late 2008 GS bottomed out (point B) several weeks before the S&P 500 did (point C).
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to the following products.
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's and SPY's.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account.
3. The "End of Month Strategy". 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.
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