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Market week ahead: more bulls are turning bearish, but the dollar continues to slide
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Certainly whatever bears are left in this stock market rally since March do not have many tears left to cry, as the Dow hit fresh highs for the year last week, closing up another 1.98% for the week to 9505. But increasingly the bulls who have been laughing all the way to the bank all summer are saying, "no mas", there is still worry in the economy. Indeed, with the 50 day moving average crossing above the 200 day moving average last week, the technicals are in favor of the bulls, announcing that this is officially a new bull market. With ten days to go before summer ends, volume is super light, but some economic data this week could push the market around. Meanwhile the dollar's continued slide keeps oil and other commodities creeping up. Where is the tipping point?
Economic News. Economic data reporting this week that will likely move the markets include consumer confidence on Tuesday, new home sales on Wednesday, and preliminary GDP on Thursday.
Talking Heads. President Obama is on vacation all week.
Technicals
Dow. The Dow Jones Industrials index gained 1.98%, or 184 points, last week reaching fresh highs for 2009. Last week we saw the 50 day moving average bullishly cross the 200 day moving average, a sign that this is indeed a brand spanking new bull market. But this week some market bulls are turning bearish, the old tune of "this just cannot keep rallying without some correction". Buying the dips in this market continues to be the plan for traders until something changes the tack.
US Dollar. The dollar index closed the week sitting at 78.00, there seems to be not much to stop its decline. Index at level 76.00 is still eyed next. However, the British pound has weakened even more and against the dollar in the past 2 weeks, and some technical divergences are beginning to emerge in the forex market, as some currency traders and analysts are looking ahead to what September may bring. Key support for EURUSD is 1.4000, and for GBPUSD support remains at 1.6000
Oil. The price of light crude has sprung back above $70/barrel and now $75 is the key level for this rally to continue upward. Though we have witnessed oil inventories falling recently, the dollar remains the major factor in this commodity rally. Any return to risk aversion could send oil prices back down.
Gold. Gold prices have also seen a return to the upside, again hitting the $955/oz level as dollar bears push it higher. This level could again hold for now, it being a key resistance. Above $955 will see $980, then the allusive $1000 test.
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