U.S. Dollar Breaks Below SupportOpinion
The indexes closed mixed yesterday with slightly positive internals on the NYSE and mixed internals no the NASDAQ. Volumes rose versus the prior session resulting in little change on the charts with two exceptions, one being the U.S. dollar closing below support. The data remains largely neutral with one exception of a warning signal. So in spite of the futures implying a down opening this morning, there is essentially nothing that has changed to cause a shift in our near term “neutral/positive” short term outlook. For the intermediate term, breadth remains healthy, leaving us “neutral/positive” in that regard. However, we are becoming more disturbed regarding valuation as it continues to climb near historically high levels.
- On the charts, there was little change yesterday with two exceptions. The RUT (page 4) closed above resistance as well as its 150 DMA. However, new resistance is fairly close at hand. The U.S. Dollar as measured by the UUP ETF (page 9) that has been discussed in these reports over the past few days did close below support and continues what we see as a long term topping pattern that is becoming increasingly weaker. Given the Dollar’s usual inverse relationship with commodities, we would expect some positive influence there. But given the size of their recent rallies, some consolidation may be required in that sector before resuming their respective uptrends.
- The data remains almost entirely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:+29.1 NYSE:+35.56 NASDAQ:+25.31). The Equity Put/Call remains neutral at 0.68 along with the new AAII Bear/Bull Ratio (contrary indicator) at 25.76/27.18. The one cautionary signal that continues to present itself is the OEX Put/Call Ratio (smart money) at a very cautionary 2.8 as the pros are now very heavily weighted in puts, expecting near term weakness. They have been on that side of the fence in varying degrees for the past week or so.
- In conclusion, we see no evidence to suggest an alteration in our near and intermediate term “neutral/positive” outlooks. However, valuation is becoming increasingly stretched and worthy of close monitoring.