Tuesday Morning

After trading higher over night, the market opened modestly higher.  at 10:00am, the Dow is trading up 30, or 0.24%.  The SPX is trading up 2.33 or 0.18%   The rest of the market is trading lower, with the Transports, the RUT, the COMP and the XLF trading lower.  The Oil market has opened higher, trading at 97.61, Gold higher at 1422 and Silver at a new post-Hunt Bros high at 34.35.  The commodity complex is up with the exceptation of Wheat.  The Euro continues higher, trading at 1.383 and the Dollar its lackluster performance, trading off at 76.79.  The 10 year Note is lower, at 3.471 as is the Bond, trading at 4.526%

News from North Africa and Middle East continues to indicate the political instability of the region is deteriorating.  Libya continues to slide into civil war, while the Sauds are reported to be sending Tanks into Bahrain.  There is an interesting report at The Oil Drum regarding the political impact on oil supplies and the exporting countries own pressing needs to grow their own domestic economies and the lack of adequate political resources to replace those being overthrown.

I don't think that I am the only observer who is feeling really queasy about the recent performance of the U. S. Dollar.  I don't think I visit a single business site that does not have a comment to make regarding the apparent weakness of the Dollar and the strength of the Euro.  It always goes something like...."the Euro is showing surprising strength as the ECB deal with the Sovereign debt problems of Ireland, Spain, Portugal and the increasing reluctance of the German tax payers to hold the Euro together" and "Fed policy will destroy the value of the Dollar".  Ya... I get it.

Here is a 10 year chart of the weekly USD history.....and it shows clearly that the Dollar is breaking its trend support line.

It has flirted with this trend line in the past, but this time it is beginning to look more serious.  I am old enough to remember when the reflexive response of investors the world over, when faced with obvious threatening political or economic events, would rush to abandon "Risk" investments and move to "Safe" investments.  For most of my life, those investors would move to U.S. Treasuries, and Gold.  When the Dow would get hit, the expected trade would be Bonds up, Gold up and the Dollar up.

But it is now apparent that something has changed.  The threats presented by the violence and political instability in Northern Africa and the Middle East and the threats to dependable production of Oil certainly present the most serious challenge world stability in a long time.  Yet, investors the world over seem to be focused on a "flight to safety" that includes Gold & Silver, U.S. Treasuries, soft Commodities and the Euro and the Swiss Franc.  The Dollar can barely generate an uptick, let alone a rally. It is beginning to feel like something is really different and I don't think we are going to like it.

Momentum Change indicators are still firmly Bearish, with the rally yesterday having only a minimal impact on this numbers.  We are back to the reality of the market internals being divergent from index direction.

As I have been typing, the market has turned decidedly weak, now trading lower with the Dow off 38 and SPX off 5.75.  I may have some trade ideas this afternoon.


Best To Your Trading!

Bill