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http://www.marketwatch.com/story/china-manufacturing-data-show-contradiction-2012-01-31
Presented by Nick Santiago January 31, 2012 10:15AM
Nearly every trading day the major stock indexes will decline before the noon hour. This decline in the major stock market indexes usually leads to a light volume rally that lasts into the close. For example, yesterday the major stock indexes dropped sharply lower at the open only to find a low after the first hour and trade basically unchanged by the closing bell. This type of activity occurs nearly every trading day since December 19, 2011 when the Dow Jones Industrial Average (DJIA) traded as low as 11,231.56. Today, the DJIA is trading around the 12,700.00 level which is close to a six month high.
The catalyst for the stock markets is the cheap money by the central banks and the better news out of the European Union. In my opinion, the falling U.S. Dollar Index is the real catalyst for a higher stock market. You see, the U.S. Dollar is the world's reserve currency, therefore, if you live in China and want to buy oil or copper you must use U.S. Dollars to buy it. When the U.S. Dollar declines everything that people use such as oil, copper, silver, rice, and other commodities will inflate and trade higher. Just look at a chart of the U.S. Dollar Index when it trades higher and you will see the stock and commodity markets tumble lower. Perhaps one day this inverse relationship between the equity markets and the U.S. Dollar will change, however, I would not bet on that happening anytime soon.
The major stock indexes are overbought and extended in the near term. The trading volume has been nothing short of pathetic during this rally. The poor trading volume could be problematic down the road as this signals a lack of real conviction. This type of action tells us that traders should enjoy the inflation rally while it lasts. Remember, nothing goes up forever, or in a straight line. The markets can only defy gravity for so long.
The catalyst for the stock markets is the cheap money by the central banks and the better news out of the European Union. In my opinion, the falling U.S. Dollar Index is the real catalyst for a higher stock market. You see, the U.S. Dollar is the world's reserve currency, therefore, if you live in China and want to buy oil or copper you must use U.S. Dollars to buy it. When the U.S. Dollar declines everything that people use such as oil, copper, silver, rice, and other commodities will inflate and trade higher. Just look at a chart of the U.S. Dollar Index when it trades higher and you will see the stock and commodity markets tumble lower. Perhaps one day this inverse relationship between the equity markets and the U.S. Dollar will change, however, I would not bet on that happening anytime soon.
The major stock indexes are overbought and extended in the near term. The trading volume has been nothing short of pathetic during this rally. The poor trading volume could be problematic down the road as this signals a lack of real conviction. This type of action tells us that traders should enjoy the inflation rally while it lasts. Remember, nothing goes up forever, or in a straight line. The markets can only defy gravity for so long.
Presented by Gareth Soloway January 31, 2012 11:38AM
After an impressive recovery yesterday, the markets opened nicely higher today. These light volume floats in the market are normal in 2012 and have helped keep stocks near their 52 week highs. However, major technical issues are showing themselves and downside looks unavoidable.
After the markets opened higher, a reversal took place. The selling has continued into the lunch hour which is a change in character. The key to the top on this market was a hit of the $133.30 level on the SPDR S&P 500 ETF (NYSEARCA:SPY). This level was a major gap fill from July. Even more importantly, if you connect the highs from 2007 and 2011, the trend line runs directly into the $133.30 level. Note the chart below.
If these reasons mentioned above were not good enough, CNBC has been pumping a golden cross on the daily chart as a signal the markets were going to surge higher. Taking the contrary view, which everyone should do when dealing with any media outlet that hypes the market, it was a sell signal.
The profits to members continue to flow in 2012. Yesterday, DHT Holdings Inc (NYSE:DHT) hit its target for a 36% gain. Today, Powershares DB Base Metals Double Short ETN (NYSEARCA:BOM) hit its swing trade target for a 10% gain. InTheMoneyStocks methodology is proprietary in nature and utilized by members to make money on every move in the market. Take the seven day free trial to the Research Center and Intra Day Stock Chat. Join the elite pros and profit today.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
After the markets opened higher, a reversal took place. The selling has continued into the lunch hour which is a change in character. The key to the top on this market was a hit of the $133.30 level on the SPDR S&P 500 ETF (NYSEARCA:SPY). This level was a major gap fill from July. Even more importantly, if you connect the highs from 2007 and 2011, the trend line runs directly into the $133.30 level. Note the chart below.
If these reasons mentioned above were not good enough, CNBC has been pumping a golden cross on the daily chart as a signal the markets were going to surge higher. Taking the contrary view, which everyone should do when dealing with any media outlet that hypes the market, it was a sell signal.
The profits to members continue to flow in 2012. Yesterday, DHT Holdings Inc (NYSE:DHT) hit its target for a 36% gain. Today, Powershares DB Base Metals Double Short ETN (NYSEARCA:BOM) hit its swing trade target for a 10% gain. InTheMoneyStocks methodology is proprietary in nature and utilized by members to make money on every move in the market. Take the seven day free trial to the Research Center and Intra Day Stock Chat. Join the elite pros and profit today.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
Presented by Nick Santiago January 30, 2012 03:32PM
Nearly every trading session over the past month the major stock indexes rally after an initial morning decline. Some investors may view this action in the market as a sign of strength, however, the trading volume remains extremely light. Light volume will usually indicate a lack of institutional participation, or conviction by the big boys. This stock market looks to be moving higher by a handful of big firms that have the means to buy every market dip. Some traders and investors believe that the central banks are basically telling the market moving firms to be in risky assets; they have promised to keep rates at extremely low levels for lengthy periods of time. It is important to note that the federal funds rate has been at zero to a quarter percent since December 2008.
Just last week, the Federal Reserve Bank said that the federal funds rate (overnight lending rate to the large banks) should remain at zero to a quarter percent until late 2014. While many investors view this action by the central bank as a sign to buy stocks other view it as a sign of weakness in the economy. Either way, the central banks are practically begging investors to buy stocks and commodities.
Here is what traders need to know, when trading volume has returned to this market it has most often been on the sell side. If you look at a chart of the S&P 500 Index the majority of the volume occurs when major stock indexes decline. This stock market has been like a yo-yo since early 2010, it will dip on heavy volume and then rebound on light volume. Traders should not expect things to change anytime soon as this pattern is likely to repeat itself throughout 2012.
Just last week, the Federal Reserve Bank said that the federal funds rate (overnight lending rate to the large banks) should remain at zero to a quarter percent until late 2014. While many investors view this action by the central bank as a sign to buy stocks other view it as a sign of weakness in the economy. Either way, the central banks are practically begging investors to buy stocks and commodities.
Here is what traders need to know, when trading volume has returned to this market it has most often been on the sell side. If you look at a chart of the S&P 500 Index the majority of the volume occurs when major stock indexes decline. This stock market has been like a yo-yo since early 2010, it will dip on heavy volume and then rebound on light volume. Traders should not expect things to change anytime soon as this pattern is likely to repeat itself throughout 2012.
