The most exciting thing in the market on Monday was the move in the U.S. Dollar and yet I saw so little fuss being made over it. I think this is the thing to keep your eyes on in the days ahead.
First of all, because the move was so tremendous for just one day but secondly, have you seen the move since we turned the calendar to February? It is up 2% since the end of January which may not seem like a lot but it is a huge move for a currency in little more than a week.
Recall that one of the reasons folks turned bearish in October and November was the strong dollar (or so they said) which is why it is fascinating no one is harping on the buck now. Even more curious is that the Daily Sentiment Index (DSI) tagged 80 on Monday. Readings over 80 often give way to corrections but readings over 90 are red flags and often reversals.
The Euro, which is around 55% of the Dollar Index finds itself sitting right at support. The only lower point on the chart is a quick flush down to 1.12 in mid November. So a break of this level would probably get even stock folks chattering.
And what is the DSI for the Euro? It's 10. And readings in the single digits typically give us reversals (since they are the inverse of readings over 90), especially if we see non-currency folks fussing loudly over it. So I say keep this on your radar in the coming days.
Away from currencies, stocks were about as boring as they seemed. Yet breadth was quite strong with the net breadth at +900 issues. Even the number of stocks making new highs increased to 86 on the NYSE, the highest reading since last Tuesday when the S&P was 15+ points higher than it is now. But I'll tell you this: despite these great internals on the market, I was hard pressed to see it in the individual stock charts.
Most stock charts were either flat, down, or just plain blah. Either I am charting the wrong stocks or Monday's statistics were all higher by pennies.
Perhaps it's because I concentrate on big caps and big caps lagged small caps by a remarkable margin on Monday. The Russell 2000 relative to the S&P made a higher high (for this move up). It's probably got to do with the dollar since small caps tend to be more domestic in nature and need not worry over a stronger dollar.
Of course if you look at October, the small caps didn't care about the stronger dollar so perhaps I should leave the narratives to those who create them!
