Taxpayer revolts have historically been a problem for many countries. The USA’s history of a taxpayer revolt much began with the Colonist revolt against the “Tea Tax” or the “Stamp Tax” as it was called, resulting in the colonists flooding theBoston Harbor with tea. The “Stamp Act” was passed on March 22, 1765. Have we not learned anything from those events? We should not forget that taxpayers can and will revolt. We hear much in the way of grumblings from tax payers who, are overburdened with leverage and see no relief. The last thing a tax payer wants to see is the government bail out the crooks. Flooding the system with dollars has several results. The primary result is to inflate the markets so that the investors feel a little better. It is thought that with this open-spigot financial plan that lending will again resume in earnest, and just in time for spring house buying season. We have yet to see the lenders open their doors with lower rates, enough to encourage more refinancing and perhaps some buying. Truly, that market in real-estate looks cheap, but alas it could get cheaper. The Northeast has been blessed with a continued firmish market. That said, we must remember also that the Northeast is just beginning to feel some of the pain of the massive lay-offs in the financial industry.
A cheap dollar can be good for the economy. Our exports will be cheaper if, there is anybody left with enough cash to buy them, on the other hand, a cheap dollar will reflate the price of commodities. As the dollar retreats, the cost of commodities that are priced in dollars increases. If you own euros you have an appreciating currency and do not feel this cost increase, so long as the euro is in rally mode. You get the picture. As we have always said, a little inflation isn’t a bad thing; it is when it gets out of hand that it is bad. As to our economy, if stuff we need to buy gets more expensive and we have fewer dollars with which to purchase them, it is not a good thing. The hope is, that with reflation of prices we will see an increased demand and as a result increased employment needs, first as temporary workers and then permanent positions. The key word in the above in hope.
Before you go celebrating that the market has finally bottomed and we will rally ourselves back into a bull market, the charts don’t tell us that…..yet. We have 9-count on the S&P 500 June futures and we were turned lower at the downtrend line. There are two ways we can overcome this for the bulls: either we gap open higher above the downtrend line and stay there from more than two days, or we rally thru and close marketedly above that line for more than two days. We do not believe that this scenario will occur. We believe it is more likely that we will return to the uptrend line at, at the very least, revisit 733 on the S&P 500 June futures.
Monday: February existing home sales are released at 10:00. Tuesday: Treasury Secretary Geithner and Fed Chairman Bernanke are back of the “Hill” for some more congressional abuse. Wednesday: February durable goods are released at 8:30, February new home sales are released at 10:00, and San Francisco Fed President Yellen speaks. Thursday: 4th quarter GDP and Treasury Secretary Geithner back on the House hot seat. Friday: February personal income and consumption is released at 8:30 and University of Michigan sentiment is released.The US Dollar index looks as though we are going to have a little rally, perhaps regaining enough ground to trade at 85.555. We see some support below the market at 82.956. Should we fail to hold the 82.956 level, we will revisit 82.00 and 80.43. The stochastic indicator, our own indicator and the RSI are all issuing a buy-signal from oversold levels. The Thomas DeMark Expert indicator is going sideways near neutral. The 5-day moving average is at 85.546, an interesting number because of its proximity to a Fibonacci number. The top of the Bollinger band is at 91.322 and the lower edge is seen at 84.607. We are below the lower edge of the Bollinger band and will not be able to stay here for very long. We have fallen below the Ichimuko clouds on the daily time-frame but remain above the clouds for the weekly time-frame. We are in the clouds for the monthly time-frame. There are two overhead troublesome downtrend lines. The steeper of two downtrend lines is at 88.080 and the less steep and longer downtrend line is at 88.914, obviously, we need to close above those lines, before we can look for a return to the upside.
The S&P 500 June futures ran up post FOMC meeting and into the expiration of the March futures and options. This rally was a strong 7-day affair taking the market back to the 800 resistance levels and downtrend line. The Thursday Friday retreat was enough to turn the indicators back to negative at overbought levels. We have a 9-count on the daily chart. The 5-day moving average is at 772.95. The top of the Bollinger band is at 805.10 and the lower edge is seen at 665.72. Naturally, we remain below the Ichimuko clouds for the all time-frames. We should find some support for this market at 733. The uptrend line is at 715 for the Monday session and will be at 734 by the Friday session.
The NASDAQ 100 has a 9-count as of the Friday session. We have three exhaustion signals on this chart. The stochastic indicator the RSI and our own indicator are all issuing a continued sell-signal from overbought levels. The retreat seen seems to be shallow. The 5-day moving average is at 1189.35. The top of the Bollinger band is at 1227.17 and the lower edge is seen at 1042.92. We are in the Ichimuko clouds on the daily chart, and well below the clouds for both the weekly and monthly time-frames. The indicators for both the weekly and the monthly charts are positive.
The Russell 2000 peaked a bit higher in the Thursday session before beginning its retreat that carried it into the Friday session. We see support at 402, 391, 381 and 372. The 5-day moving average is at 403.04. The top of the Bollinger band is at 426.65 and the lower edge is seen at 338.38. We are below the Ichimuko clouds for all time-frames. The downtrend line is at 418 for the Monday session and 425 for the Friday session. All the indicators that we follow are issuing a sell-signal. We will be into a world of pain if this market retreats to 327.50 and below, there is nothing but empty air below that level. On the upside we see supply all the way to the 497.80 area above which, we have almost no supply.
Crude oil has finally broken above the Ichimuko clouds on the daily chart. The uptrend line for the Monday session is 46.59. We are overbought and the indicators are curling over to the downside, issuing a sell-signal. We have broken out of a long base and, after a pause or retreat, this market looks as though it will work its way higher. The top of the Bollinger band is at 52.13 and the lower edge is seen at 37.56. Part of the rally in crude could have been because the US Dollar has been lower in recent days. Crude oil is largely dependent on stability and expansion in our market and the global market.
Gold is again the favored investment as the FOMC moved to flood the market with dollars, in an effort to re-inflate the flagging economy. Again, whispers by some members of the UN regarding the US currency’s status as the reserve currency was brought into question. This caused some flight out of the currency into gold. Gold is overbought on the daily chart. We are above the Ichimuko clouds for all time-frames. The 5-day moving average is at 928.50. The top of the Bollinger band is at 994.70 and the lower edge is seen at 878.45. Gold many need some backing and filling before it gains enough energy to move higher. We continue to like gold, but would prefer to buy it on dips rather than chasing it up the chart.
Jeanette Schwarz Young CFP, CMT
One North End Avenue
New York, New York 10282