- Here’s how the week fared for the major indices and sectors
Overview
- The dollar’s rise could signal risk aversion once again. The VIX is once again on the move higher.
- Any news is bad news at the moment.
- We ralled higher on lower volume and the selling will have a material impact.
Major Markets
- The best performer continues to be the NASDAQ posting a 20% return for the first half of the year
- Dollar Trended up; commodities were sold off!
SECTOR PERFORMANCE
- Cylicals were sold heavily. Part of the selloff is due to the dollar’s rise
Stocks By Capitalization
- Large and Mega stocks were sold heavily in this rally suggesting big funds were selling this market.
Major Developments & Its implications
- Golden Cross
This week there was the talk of the “Golden Cross”. A Golden cross is when the 50 day ma cuts the 200 day moving average. Is this a bullish sign? Well, it depends! In order to consider this a bullish signal, both the 50 day & 200 day MA have to rise together. In the current environment, given the latest economic data, It would be difficult to see how this could be done.
- Negative Correlation (USD and SPX)
Since Lehman fail, the USD and SPX are moving in opposite direction. If USD starts to rise once again it could impact the earnings of US multinationals whose international sales are a large part of overall revenues.
- Oil and USD (Negative Correlation)
Similar to the chart above, take a look at Oil and USD…The recent moves can be largely explained by the USD dollar move lower.
- Natgas
Natgas continues to be beaten down. Oil/Natgas Ratio currently stands at (65/3.60 = 18). Regardless, the relentless downtrend continues…
- Job Numbers
Job Numbers continue to be aweful…The Green represents somewhat improvement, and red represents detioration.
Check out this interactive presentation from WSJ showing US unemployment rate
- Finally, VIX!!!
VIX has come down substantially in the last few months (since Mar rally began). Below is a chart that superimposes the % of S&P500 stocks above their 200-day ma to the VIX, note they are negatively correlated. Below that is the same chart, except the ’% of S&P500 stock above their 200-day ma’ chart is inverted to display the movement with the VIX better.
Conclusion
- Watch the Dollar and watch the VIX, both will have an effect on the market. Secondly, any news is now taken as bad news. We’ve rallied on low volume and now the selling will have a material impact as there are no buyers. We’ll have to watch the markets
007.07.09 Watch the VIX, Watch the Dollar!!!
Markets are under pressure today July 7…
Watch the dollar and the vix, both are moving in lockstep…both indicate risk aversion is back.
Looking at the variuos markets in the last 4 days, the impact has been material…
Selling is broad based across all sectors…
The selling should continue. so look for the dollar and vix to rise in the next few weeks. There is a talk of another stimulus plan, what impact will that have on the markets, we’ll wait and see!!!