The Dollar Loses More Ground As Stocks Attempt A Weak Rebound
Stocks were higher, lower, and higher, and they faded towards the day’s end, trading within a fairly wide range throughout the day. More importantly, the dollar continues to weaken significantly, falling against the yen, franc, and euro.
Equities seemed to diverge from their usual pattern of following the FX market, at least for part of the afternoon. This has occurred for a few days, dating back to last Wednesday. I don’t have a clear explanation for it, but that’s what has happened. Either the markets are diverging because the forces that once aligned them are fading, or the equity market has more downside ahead.
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Perhaps more importantly, the dollar index is now very close to breaking support around 99.50 and could potentially head lower to 97.60 or even as low as 96.15. That would be good news for the euro and all others.
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Stocks may have moved against the currency trend today because rates were lower. Interestingly, stocks and rates have been positively correlated more recently. But not today, it seems, as 10-year rates were sharply lower, stocks went higher. So I’m not sure if something is changing, or if today was just a rally day because investors were still hopeful about the weekend news and tariff exemptions, which wasn’t as positive as it was billed to be in the social media realm.
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Essentially, all the S&P 500 did today was fill the gap from the close on April 9. That marked the high for the day, and the index never returned to that level, selling off in the final minutes of trading. Another gap at 5,670 remains unfilled, but given today’s relatively weak market performance, it seems less likely to be filled. Additionally, the strong uptrend that began on April 8 is now broken. This would be a negative sign, and the dollar continues to weaken as the technical suggests, the outlook for stocks rising doesn’t seem likely.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. ...
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