The Stock Market and the Dollar ...

By: Marty Chenard | Mon, Dec 14, 2009
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Most investors say that a lower Dollar is a positive for the Stock Market. Others, like Art Cashin at UBS Financial Services, recently said that "if there is a real rush to the Dollar, it could produce a 1,000 point drop in a day ... (on the DOW)".

The reality is that it is often the "speed" at which something happens that determines what happens to the stock market. Most market related events have what is called an associated "absorption rate".

If for instance, the Dollar took a year to rise 5%, then the probability is that the stock market would absorb the "shock effect" because it was happening at a slower pace than the improvement of market fundamentals.

However, if the Dollar were to rise 10% in two days, then that would create an imbalance that the stock market couldn't absorb that quickly and that would be a negative influence.

So, why are we even discussing this?

Because the Dollar has been trying to establish a " base" since the end of last October. Last Friday, it made significant strides in that basing process. On Friday, the Dollar closed at 76.55 ... just below a critical resistance level of 76.82.

Take a quick look at today's chart below ...

Our two indicators are showing that the bias is for further upside on the Dollar. The Dollar's RSI has moved up above 50 which is bullish, and our Hybrid S.T. Accelerator is strong and trending up.

When we close above 76.82, be observant of the speed of the rise, as it will be important.

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/