The buck broke. And like a tree that falls in the forest, no one even noticed.
When I mentioned it on Twitter, some responded that we needed to break January's low for it to matter. Most ignored it, like it didn't matter, or worse, they didn't even notice it.
I prefer when there is non-stop chatter about it. I prefer when folks get a bit, shall we say, hysterical, about it. When it becomes the obsession of the day. So far, that has not happened, not even a whiff of it. But I am on the lookout for it, because the Daily Sentiment Index (DSI) is now at 13.
Sometimes we only get the hysteria when it has a direct effect on stocks and folks are scampering for a narrative as to why stocks are down (or up) and they glom on to a currency story. But with stocks chopping nowhere, we haven't gotten that. Not yet. If we do get some hysteria and the dollar does turn, it would change the nature of the stocks that have been in vogue since early April. Value stocks should take a time out.
The way I figure it, we'll see plenty of chatter if it spills over into stocks. I'm sure you remember the hysteria over lumber a few short weeks ago. Not an hour went by that we didn't see some chart of lumber posted, that we didn't hear stories of how much the price of lumber was jacking up the cost of a new house.
But we don't hear those stories anymore, do we? No, we don't. When lumber topped $1,500 the DSI got to 96 and actually stayed up there for five days before topping $1,700 and reversing. With lumber now under $1,300 and down the limit quite frequently these last two weeks, which means there is a limit on how low it can trade each day, the DSI is 14.
No wonder we don't hear about lumber anymore.
But back to the buck. You see if we look at the chart of the gold exchange-traded fund (GLD) and we can see it bottomed in early April as the buck peaked. So, there are plenty of trades this would have an impact on. I think gold is OK on an intermediate-term basis, but right here there is resistance even if it crosses that $175 area and can cross that line. There is just a lot of supply for it to eat through now.
As for the stock market, the chop-fest remains fully intact. We can't seem to get a whoosh, which would be bullish, because it would clean out the sellers overhead. Without a whoosh we get a tired market.
Back in mid-April I said I expected a pullback in the second half of the month. The S&P was at 4127 on April 12, and it is now at 4127. Not only did we not get a pullback, we got nothing but chop. And so the sideways market continues.