Is it Time to Focus on Global Growth?

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Traders may want to refocus attention from the S&P 500 to the greenback. That was a key takeaway from our exclusive client-only Morning Market Briefing webinar this morning.

Using Fibonacci Retracement lines on his Chart Analysis, TradeStation VP David Russell showed the U.S. dollar index (@DX) hit the 38 percent retracement line for its drop between December and late-January. (See arrow on chart below.) That may suggest its longer-term downtrend will continue despite strong economic news on the domestic front.

Russell added that such a backdrop is usually favorable for copper (@HG), which tends to follow sentiment toward the broader economy. He said you can see how this impacts other assets by looking at miner Freeport-McMoRan (FCX), which is down more than 10 percent from recent highs despite reporting better-than-expected results on January 25. (FCX ranks among one of most liquid names for options traders in the entire market, according to TradeStation data.)

The weak dollar has also been lifting global stocks since last spring. This year has brought strong industrial reports in Europe and China, as well, plus better political conditions in Latin America.

Speaking of Latin America, Russell noted that Brazilian stocks suffered much shallower pullbacks in February than their U.S., European or Chinese counterparts. He interpreted that as a sign of relative strength and said customers may want to consider major names from the country such as Petrobras (PBR), Itau Unibanco (ITUB) and Banco Bradesco (BBD).

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Dr. Don Pratl is Director of Trader Development and Education for TradeStation. He joined TradeStation in 2016 after holding similar roles with other online brokerages. Don’s long career in the financial services industry reflects expertise in administering trading and investment strategy programs for retail investors as well as financial services professionals. Since the 1980s, he has held various positions in areas including CBOE trading floor order execution, marketing, sales, personnel management, training and customer service. Don holds series 3, 4, 7 and 63 FINRA licenses, earned his Ph.D. in Organization and Management, and his M.A. and B.A. in Political Science. He has been an occasional adjunct college instructor since 2004 at a range of institutions, teaching undergraduate, graduate and doctoral students using in-class and online formats.