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Global Outlook

U.S. Dollar Turning Up?

April 7, 2014, Monday, 05:11 GMT | 00:11 EST | 09:41 IST | 12:11 SGT
Contributed by eResearch


The U.S. dollar ETF (UUP) turned systematically neutral (from bearish) on 4/3/14 by crossing above its 50-day SMA. From a longer-term perspective, UUP price has whipsawed around its 50-day SMA for many months but still has remained systematically bearish most of the time since peaking at 22.98 on 7/9/13.

The Large Cap S&P 100/S&P 500 Relative Strength Ratio (OEF/SPY) turned systematically neutral (from bearish) on 4/3/14 by crossing above its 50-day SMA.

The S&P 500 Composite Index (SPX: 1,888.77, down 0.11%) absolute price opened higher but immediately reversed to the downside. By 2:40 pm ET, SPX had fallen below the previous day's low. A bounce in the final 80 minutes recovered most of the day's loss. SPX closed below the open but above the midpoint of the day's high-low range.

NYSE total volume fell 2% to a level 8% below its 200-day SMA. Generally, rising volume confirms the direction (up or down) of a price move, but falling volume may indicate diminishing power behind a price trend, which can suggest a price reversal ahead.

The Number of Daily Net New Highs on the NYSE (New Highs minus New Lows) fell to 337 from 419 the previous trading day. These levels compare to peaks above 800 recorded in 2012 and 2013, when the S&P 500 was lower than it is now. So this indicator still is diverging bearishly relative to last year's levels.

Momentum oscillators RSI and MACD based on the S&P 500 Index continue to demonstrate bearish divergence compared to price. Both have turned upward in recent days, but both are still below their peaks of 2014 and 2013--and this after falling to their lowest levels in more than 14 months on 2/3/14.

Although the S&P 500 closed at a new high on 4/2/14, neither the Nasdaq Composite Index nor the Dow Jones Industrial Average closed at a new high, suggesting non-confirmation.

The outlook for the stock market appears uncertain. Non-confirmations, momentum divergences, generally low trading volume on up days, and excessive bullish sentiment remain challenges to a sustainable upside trend. On the other hand, the bullish case appears to rest primarily on continuation of central banks' highly-accommodative monetary policies and hopes for faster economic recovery.


Stock Market Indicators

The Dow Theory reconfirmed a Primary Tide Bull Market on 12/31/13 when the Dow-Jones Industrial Average and the Dow-Jones Transportation Average both closed at new closing price highs. The Averages have been diverging since 12/31/13, however, suggesting that all the parts of the stock market may not be in gear and pulling together in the same direction. If both Averages close below their lows of 2/3/14 without the Industrial Average confirming the March higher high of the Transportation Average, that could be a significant sell signal.

NASDAQ 100/S&P 500 Relative Strength Ratio (QQQ/SPY) crossed below its 50-day SMA on 3/20/14, thereby turning systematically neutral (from bullish). Absolute price of QQQ crossed above its 50-day SMA on 4/1/14, thereby turning systematically bullish (from neutral).

iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell below its lows of the previous 8 years on 3/13/14, thereby reconfirming its pre-existing long-term downtrend. The 50-day SMA remains below the 200-day SMA. BKF/SPY has underperformed since it peaked on 10/14/2010. Absolute price of BKF fell below its lows of the previous 9 months on 3/13/14, thereby reconfirming its pre-existing downtrend. Price peaked at 42.29 on 2/1/13, fell to a 20-month low at 32.62 on 6/24/13, and remains stuck in that trading range.

Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell below its lows of the previous 8 years on 3/13/14, thereby reconfirming its pre-existing long-term downtrend. The 50-day SMA remains below the 200-day SMA. Long term, EEM/SPY has underperformed since the ratio peaked on 10/14/2010. Absolute price of EEM fell below its lows of the previous 7 months on 2/3/14, thereby reconfirming its pre-existing downtrend. Price peaked at 45.34 on 1/2/13, fell to a 19-month low of 36.16 on 6/24/13, and remains stuck in that trading range.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) has remained systematically bearish most of the time since 12/10/13, when the 50-day SMA crossed below the 200-day SMA. EFA/SPY fell below its lowest levels of the previous 11 years on 3/20/14, thereby reconfirming its pre-existing major long-term downtrend.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEF/SPY) turned systematically neutral (from bearish) on 4/3/14 by crossing above its 50-day SMA. The 50-day SMA remains below the 200-day SMA. Large Caps tend to underperform Mid-Caps and Small-Caps in bullish general market trends as investors seek greater potential returns in more volatile, smaller stocks. On the other hand, Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative stability and safety of large size.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) crossed below its 50-day SMA on 3/25/14, thereby turning systematically neutral (from bullish). The 50-day SMA remains above the 200-day SMA. Absolute price crossed above its 50-day SMA on 3/31/14, thereby turning systematically bullish (from neutral).

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) crossed above its 50-day SMA on 3/31/14, thereby turning systematically bullish (from neutral). The 50-day SMA remains above the 200-day SMA. Absolute price crossed back up above its 50-day SMA on 2/11/14, thereby turning systematically bullish (from neutral).


Tangible Assets, Commodities

U.S. dollar ETF (UUP) turned systematically neutral (from bearish) on 4/3/14 by crossing above its 50-day SMA. From a longer-term perspective, UUP price has whipsawed around its 50-day SMA for many months but still has remained systematically bearish most of the time since peaking at 22.98 on 7/9/13. For nearly 3 years, since 5/4/11, UUP has been fluctuating between 23.14 and 20.84. Support 21.07 and 20.84. Resistance 21.96, 22.34, 22.98, 23.14, 23.52, 25.84, 27.19, and 28.97.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price 50-day SMA rose above the 200-day SMA on 3/4/14, thereby turning systematically bullish (from neutral). Previously, DBA had been in a cyclical bear market for nearly 3 years, from a peak at 35.58 on 3/4/11 to a low of 24.04 on 1/22/14.

Crude Oil, United States Oil ETF (USO) price crossed above its 50-day SMA on 3/18/14, thereby turning systematically neutral (from bearish). USO appears to have firmed somewhat since making a low at 29.02 on 6/28/12. Support 34.97, 34.00, 32.53, 32.12, 30.79, 29.02, 26.28, and 22.74. Resistance 37.74, 39.54, 39.64, 40.29, 41.38, 42.30, and 45.60.

Gold, SPDR Gold Shares ETF (GLD) price, trading in a range between 114.46 and 133.69 since 12/31/13, remains systematically neutral. Support: 127.15, 114.46, 113.08, and 102.28. Resistance: 133.69, 137.62, 143.43, 149.44, 153.85, 156.80, 164.40, 166.94, 170.01, 174.07, 175.46, 177.40, and 185.85.

Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) turned systematically neutral (from bearish) on 1/13/14 when it crossed above its 50-day SMA. Longer term, GDX/GLD has been systematically bearish most of the time since absolute price peaked at 66.98 on 9/9/11.

Silver, iShares Silver Trust ETF (SLV) price turned systematically bearish (from neutral) on 3/20/14 when it crossed below its 50-day SMA. Support 18.26, 17.75, 16.73, 14.37, 12.27, 11.64, and 8.45. Resistance: 21.30, 22.23, 23.84, 25.34, 27.14, 27.35, 28.50, 28.61, 29.73, 31.41, 32.72, 33.31, 34.08, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71, and 48.35.

Silver/Gold ETFs Ratio (SLV/GLD) turned systematically bearish (from neutral) on 2/26/14 when it crossed below its 50-day SMA. Longer term, SLV underperformed GLD substantially for 27 months from 4/28/11 to 7/30/13, and that downtrend may not be over.

Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) price remains systematically bearish. JJC price broke down below the lows of the previous 4 years on 3/19/14, thereby reconfirming its pre-xisting major long-term downtrend. "Dr. Copper" is widely accepted as one of the better indicators of investor confidence (or lack thereof) in the global industrial economy.


Spotlight On Event Stocks

Here is a stock screen I designed to pick out potential event stocks, both Bullish and Bearish. Sometimes, stocks with large changes in price and volume are later revealed to be deal stocks or are the subject of some other extraordinary events, positive or negative.

Bullish Stocks: Rising Price and Rising Volume
Ranked by Price Change * Volume Change