"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 8 hours Why Are Investors Overlooking Gold Stocks?
  • 9 hours The App That Democratized Trading Is Now Worth $5B
  • 10 hours Super-Cycles: Why Gold Is Set For A Breakout
  • 11 hours U.S. Sanctions Russia For Election Meddling And Cyberattacks
  • 12 hours Snap Shares Tank Over ‘Slap Rihanna’ Campaign
  • 13 hours How Low Can Bitcoin Go?
  • 14 hours Amazon’s Japan HQ Raided In Anti-Monopoly Push
  • 16 hours Is Barrick Gold Close To Finding A Bottom?
  • 1 day Morgan Stanley’s Top 10 Short-Term Stock Picks
  • 1 day China: The Land Of The Ultra-Rich
  • 1 day Alibaba Soars On Reports Of China Listing
  • 1 day What Killed Toys ‘R’ Us?
  • 1 day SEC And IRS Take An Aggressive Stance On Cryptocurrencies
  • 2 days Bears And Bulls Face Off In Gold Markets
  • 2 days Bitcoin Is Winning Over The Housing Market
  • 2 days Markets Slide Sideways As Trade War Fears Linger
  • 2 days Why Aren’t Millennials Investing?
  • 2 days Bitcoin And Banking: The Next Mobile Payment Revolution
  • 2 days SEC Cracks Down On Silicon Valley’s “Disruptive Tech”
  • 2 days Wyoming Eliminates All Taxation On Gold And Silver

The Most Important Chart On Wall Street

Foreign Weakness And A Strong Dollar

Stocks have done very little in the "prove it to me" department in recent sessions. Monday's focus was on slower growth, allowing the string of up and down equity sessions to spill into the new week. From Bloomberg:

U.S. stocks fell, sending the Standard & Poor's 500 Index below its 200-day moving average after a rout wiped $1.5 trillion from global equities last week. Brent crude dropped to the lowest level in almost four years, while the dollar weakened and gold climbed.

The Most Important Chart On Wall Street

While the S&P 500 is more widely followed, we can gain some insight by looking at the broader New York Stock Exchange (NYSE) Composite Index. Regardless of whether or not the broad NYSE Composite Index can hold above 10,301, we will learn something one way or another about the market's evolving tolerance for risk. The arrows in the chart below show levels that have acted as support and resistance since 2006. The two blue lines intersect near 10,301. As long as 10,301 holds, the odds of a rally taking place will be higher. If 10,301 fails to attract support from buyers, then the bullish push higher in early 2014 could be classified as a "failed breakout", which would increase the odds of bad things happening in the weeks ahead. The NYSE Composite closed at 10,172 Monday. The weekly close will provide more information (Friday at 4 pm ET).

NYSE Weekly Chart

Higher Risk Until Proven Otherwise

How much risk is in the current market? You can decide after reviewing this week's stock market video, which covers large caps (SPY), small caps (IWM), the VIX (VXX), bonds (TLT), the Dow (DIA), and the NASDAQ (QQQ).

Dollar Down, Bonds Up

Recent economic data and comments from policymakers gave bonds a boost Monday, while the U.S. Dollar (UUP) weakened. From Bloomberg:

The U.S. dollar fell against a basket of major currencies on Monday on persisting concerns about global economic growth and worries that the Federal Reserve may delay its first interest rate hike. Concerns over the health of overseas economies continued in the wake of last week's weak German economic data and the International Monetary Fund's cut to its global growth forecast. Meanwhile, Fed officials said on Saturday that a slowdown in the global economy could hamper a tightening of U.S. monetary policy.

Investment Implications - The Weight Of The Evidence

The "prove it to me" market keeps blowing through areas of possible support. In Monday's session, several more levels were taken out (see below). Consequently, we reduced our already small stake in stocks (SPY) further Monday, and added to the cash and bond (IEF) side of the ledger.

SPX Daily Chart


Back to homepage

Leave a comment

Leave a comment

Sign Up For The Safehaven Newsletter