Weak Dollar Saves the Day: Market Trends

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Sizing Up the Market

  • S&P 500 slides but holds January low
  • Index tests 200-day MA
  • Index at falling trendline from December and January
  • RSI stays above oversold
  • Intermarket:
    • 10-year Treasury yield holds 4.1 percent
    • VIX still above 20, under December peak
    • U.S. dollar weakens sharply
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S&P 500, daily chart, with select patterns and indicators.

Dollar Weakness Boosts Risk Appetite

  • Europe’s STOXX50 index up 5 percent in last month, outperforming S&P 500 by widest margin since November 2022
  • U.S. dollar index on pace for worst week since November 2022
  • German politicians look to create $540 billion debt-financed defense-spending plan
    • Plan would remove 2009 “debt brake,” allow more deficit spending
    • BofA: Plan would “meaningfully” change economic outlook
    • UBS: “Genuine value case” based on fundamentals as investors reallocate from growth
    • Has investor rotation begun?
  • Greenback double weakness: Japanese yen weakens against Euro but gains against U.S. Dollar
    • Gold and silver also gain
  • S&P Global: China stocks may benefit from mandate to invest insurance premiums in domestic equities.
  • Global Stocks vs S&P 500
    5-day change21-day changeYTD change
    S&P 500-1.9%-2.5%-0.7%
    ADR basket+0.3%+3.5%+7.4%
    Source: TradeStation Data, Citi

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    About the author

    David Russell

    David Russell is Global Head of Market Strategy at TradeStation. Drawing on more than two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.
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