The dollar is still calling the shots
Stocks moved only modestly higher last week despite some decent earnings reports, but as we suspected there was a lot of “sell the news” reactions to some of those good reports. The dollar showed some strength last week and that put some pressure on the stock market as well.
For the week, the TSP stock funds were mixed as the C-fund gained 0.61%, the S-fund was up 0.37%, and the I-fund lost 0.46% as the dollar rallied back some last week . Bonds (F-fund) were up 0.30% and the G-fund picked up 0.04%.
All of the funds remain in positive territory for the month of October, with the I-fund still leading the way with a gain of 4.07%.
Looking at the charts below, it is easy to see that there is a strong inverse correlation between the U.S. dollar and the U.S. stock market. This not always the case, but when it is, it does assist us in finding direction.
The Dow has been in a steady uptrend since September while the dollar has been in decline. On Tuesday of last week, the dollar rallied sharply after China announced a surprise interest rate hike. That sent U.S. and global stocks tumbling, but by week’s end, the losses were basically recovered, and the dollar pulled back some. It’s interesting that the Dow found support at its 20-day exponential moving average (EMA, while the dollar ran into resistance at its 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have been talking about the upcoming elections being a big factor in the stock market’s recent strength, but clearly the dollar has been the major influence. We’ve also talked about the upcoming quantitative easing (QE 2) by the Fed that might be officially announced at next week’s FOMC meeting on Wednesday. That has been a catalyst for the dollar decline as more money being pumped into the system means a weaker dollar. I am still a little concerned that once the QE 2 is announced, we could have a “buy the news” reaction in the dollar, which in turn would likely hurt the stock market.
Next Wednesday is also the day after Election Day so any election surprises that might affect the balance of power in D.C. could also have an impact on Wall Street. We’ll have to wait and see how things play out.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
Stocks moved only modestly higher last week despite some decent earnings reports, but as we suspected there was a lot of “sell the news” reactions to some of those good reports. The dollar showed some strength last week and that put some pressure on the stock market as well.
For the week, the TSP stock funds were mixed as the C-fund gained 0.61%, the S-fund was up 0.37%, and the I-fund lost 0.46% as the dollar rallied back some last week . Bonds (F-fund) were up 0.30% and the G-fund picked up 0.04%.
All of the funds remain in positive territory for the month of October, with the I-fund still leading the way with a gain of 4.07%.
Looking at the charts below, it is easy to see that there is a strong inverse correlation between the U.S. dollar and the U.S. stock market. This not always the case, but when it is, it does assist us in finding direction.
The Dow has been in a steady uptrend since September while the dollar has been in decline. On Tuesday of last week, the dollar rallied sharply after China announced a surprise interest rate hike. That sent U.S. and global stocks tumbling, but by week’s end, the losses were basically recovered, and the dollar pulled back some. It’s interesting that the Dow found support at its 20-day exponential moving average (EMA, while the dollar ran into resistance at its 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have been talking about the upcoming elections being a big factor in the stock market’s recent strength, but clearly the dollar has been the major influence. We’ve also talked about the upcoming quantitative easing (QE 2) by the Fed that might be officially announced at next week’s FOMC meeting on Wednesday. That has been a catalyst for the dollar decline as more money being pumped into the system means a weaker dollar. I am still a little concerned that once the QE 2 is announced, we could have a “buy the news” reaction in the dollar, which in turn would likely hurt the stock market.
Next Wednesday is also the day after Election Day so any election surprises that might affect the balance of power in D.C. could also have an impact on Wall Street. We’ll have to wait and see how things play out.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
