Stocks lower on low volume

qqq0328.pngStock indexes fell back a bit after the the recent rally stalled out mid-week. I was worried about the light volume on the rally, as I mention previously. The volume picked up a slight bit on the drop Thursday, but was very light on Friday. The chart of the Nasdaq/QQQQ shows the trend lines having turned back up, and now with prices coming back down to test. There is a bit of price support at the same point as the lower, darker blue, moving average. If prices can mount a bounce off this area, and if volume can start to increase, the rally might be able to resume. I’m still leaning with a slight bias to the bull side. The S&P chart looks a bit less encouraging. I keep using the word “bit” as there isn’t much conviction either way yet, so “bit” seems appropriate. The indexes have been coming off a period of extrememly high volatility, which could be a good sign that the down move is coming to an end. The other problem I see for the bull case is the much advertised double bottom. It doesn’t seem quite right to me, both from the consensus aspect as well as the way it sort of formed backwards. The possibility of another move down is still in the cards. A move higher on increased volume would put a bit more conviction into my bullish bias. Until then the bear remains in the upper left corner and I remain a bit still on the fence with only a bit of a bullish bias. I know this isn’t much help. Well, maybe it is by just a bit.
dollar0328.pngThe chart to the right is of the US Dollar index. I’ve been expecting a rally for some time now, but the dollar has not been accommodating, at least so far. Every rally seems to fail with another round of selling coming into the market. I still think at some point the fed will ease and the dollar will do what is not expected and go up. I think it will still happen. At least I haven’t gone long yet. I haven’t had much in the way of technical evidence of a turn yet. Notice how the recent bounce went right up to the declining moving average (blue line) almost to the tick, and then turned back down. I’ve never changed the parameters of those lines. They are the basic Mesa Adaptive Moving Average formula by John Ehlers. I have a link to his site on my resources tab if you want to get more information on his work. I find that indicator a great summary of the trend, a long with the price structure and market profile.
Steve Forbes had it right in his commentary in the current issue of his magazine. In case you don’t have it I’ll put in just one paragraph. I urge you to read the rest. “The weak dollar is pummeling equities, disrupting the economy, distorting global trade and giving hundreds of billions of dollars in windfall revenues – through skyrocketing commodity prices – to our adversaries such as Iran and Venezuela. Not since Jimmy Carter has the U.S. had a President so oblivious to the damage done by an increasingly feeble greenback.” I would only put a bit (there’s that word again) less emphasis on blaming the President and instead put the blame on Bernanke and Paulsen. I don’t want to hear Paulsen say one more time that we have a strong dollar policy. I guess the greenback would be worth zero by now if we had a weak dollar policy.
And regarding commodities in general, that are really being driving by a strong dollar and rampant speculation, I think traders and investors in them and the stocks related to them, will suffer the same fate as those trading tech stocks in 1999 and 2000. I’m tired of hearing Jim Rogers reasons and the China story. There were equivalent reasons and analysts projections regarding the tech and bubble dot com stocks of the late 90’s, and look what happened. History is about to repeat, but most think this time is different. It is difficult to see a bubble when inside one. Bulls make money, bears make money, but hogs get slaughtered. (And hogs are a traded commodity.)

Leave a Reply

Your email address will not be published. Required fields are marked *