Market Range Still Intact – For Now

Volatility was kicked up a notch during this short trading week as more uncertainties are uncovered and more ‘can kicking’ is contemplated. The beginning of the week saw the markets start deep in the hole but managing to dig out late Tuesday and have a robust rally Wednesday, but then slump again to end the week below where we were prior to the holiday. The market rollercoaster ride continues.

At best it’s challenging, at worst impossible to trade this market. The range is wide – call it 1120-1230 on the SPX. For those who are patient and waiting for things to turn that is ok – but certainly patience may be running thin. As the troubles deepen in Europe and solutions are not found the fear about some sort of ‘end game’ will constantly be lurking.

Chart Time!

The chart of SPX is constructive and definitely showing a wide range (see below). The current high volatility portrays wide ranges in the distribution – so no surprise when we see big moves up and down.

Technical factors are mixed here but can certainly go either way. The recent low of 1120 on the SPX seems solid but we’re in a fearful market – so trying to pinpoint levels that ‘should’ hold is really useless.

That should not render charting and technicals invalid, rather trying to draw a line in the sand may prove to be futile. Emotions, fear and machines dictate movement right now – there is no rationality, trend or pattern to discern on a daily basis. When markets move with such force on news it is best to wait for it to pass.

Best Currency in a Bad Neighborhood

Don’t look now but the buck is rallying. It has been on a tear for several weeks now as many flee the rotten currencies and seek the ‘safe’ status of the dollar. Now, isn’t that interesting?

For weeks and months the currency gets hammered, smashed and humiliated – heck, I saw a picture of George Washington on the bill with a black eye.

Too much debt, the Fed debasing the currency and a weaker economy. The Chinese preferring to diversify and sell dollars as they lack confidence in the greenback as the world reserve currency. All that doesn’t add up to a stronger buck, so what gives?

Add in the strength of gold as an alternative and it really makes no sense! I would say that although our situation here in the ‘states is poor it is much better when compared with other regions.

Unemployment is high but companies continue to pump out good earnings and are flush with cash. Banks are in much better shape here than in Europe, which seems to be fighting fires constantly.

So, does that mean the US is actually in great shape? Not at all, but currency fluctuations are normal and become magnified in times of indecision.

Unless the Fed unleashes some powerful new stimulus in the form of QE3 (which may happen and weaken the buck, but I believe should not occur) then the dollar may indeed become a viable alternative currency.

One casualty to a stronger dollar will be exports and sales by multinationals such as IBM, which gain from a weaker dollar.