There was a song you may well recall that chorused, “And I don’t give a dang about a green-back dollar, spend it fast as I can, for a wailing song and a good guitar is the only thing that I understand (poor boy), the only thing that I understand.” Well, you may be a little young to recall it verbatim! You are forgiven.
Anyway, a lot of people must not be caring much for the old greenback these day (see the chart below – symbol UUP). And that’s good news and bad news. The bad news is that foreign made and shipped products cost us more now. The good news is that our manufactured goods are more affordable for other nations to buy. This affordability factor can give a boost to US exporting companies. Estimates suggest that a 6 ½% boost to earnings can happen. That has also boosted the markets to all-time or near all-time highs once again.
Midday the Dow is up well over a hundred and twenty points. Big Dow components have reported earnings today. Caterpillar and McDonalds scored well; Eli Lilly and 3M had some problems. In general, earnings are coming in strong and above expectation. When that happens, the only dance in town is the Market, with the greenback standing in the corner hat-in-hand.
Strong sectors this past week included Rare Earth Strategic Metals (REMX), China/India (FNI), Biotech (FBT), Coal (KOL), and Mexico (EWW). On the flip side, Natural Gas (UNG), Oil & Gas Services (XES), Retail (XRT), Livestock (COW), and Telecommunications (IYZ) were on the weak side from a realtive strength standpoint.
Technical Tea Leaves see the near term as: “Trend Status has changed to a weak upward trend. This indicates that an upward trend has started and may continue in this direction. This is a moderate bullish signal.
“Closing prices on the market have increased to a 21 day high but market breadth as measured by advances and declines is declining. This non-confirmation in a trading market is a weak bearish signal indicating a possible downward price movement. “