Once again, the USD currency is dominating the market moves today. Slight change in direction in the $USD, and everything followed. The recent pullback in the USD has been aggressive. BUt look at bounce off the fibonacci retracement line. Typically, when things pull back, they pull back to one of the 3 main fib lines. By only pulling back 38% this would mean the USD is probably still in a roaring bull market.
We started with the Dollar Index up a full 1/2 cent today and that put negative pressure on the equities and commodities.
When the US dollar moved today, it immediately affected gold, oil, and copper. That puts downward pressure on equities related to all of those companies that get revenue from commodities which is a large part of the Canadian Index. The commodities are also an important part of the US indexes. It also affects companies that get foreign revenues so it influences how much they get in exchange for the dollar.
Now let's talk bonds.
The Bond Market started to move down in yields a week ago. When the TV talking heads (commentators) say that the bond market and the equity market are telling different stories, what does that mean? Well, usually the currencies, then the bonds, then the equity and then the commodities. Equities hit highs on Wednesday, but the bonds let go earlier in the week. But you can see the bond yields are falling quickly.
But the five year already hit record lows today. The 10 year is near the lows. The 30 year is plummeting in yields. If you look back at the 3 month, it can move down that distance in 2 days. Basically to zero yields.
Copper needs to hold the 200 day or we are not happy. It pulled back today.
It also sold off in higher volume.
Watch closely, so far the $SPX topped in the range we wrote about in the article titled Looking for Trouble. I mentioned between 1320 and 1345. So far it has peaked at 1333.
Caution is warranted.
Greg Schnell. CMT