U.S. stock index futures were suggesting a modestly higher
open on Wednesday. Overnight markets were mostly higher. The U.S. Dollar
was showing some strength against the Euro once again. Today's Economic
Calendar:
- MBA Purchase Applications 7:00 AM ET
- ICSC-Goldman Store Sales 7:45 AM ET
- Housing Starts 8:30 AM ET
- Import and Export Prices 8:30 AM ET
- Redbook 8:55 AM ET
- Industrial Production 9:15 AM ET
- 4-Week Bill Auction 11:30 AM ET
- FOMC Minutes 2:00 PM ET
- Treasury Budget 2:00 PM ET
News For Thought
A different kind of bailout: Morgan Stanley may hand hotels over to
creditors. According to Reuters: "Morgan Stanley may hand over to creditors
its $2.4 billion investment in a chain of Japanese hotels when the debt
becomes due in April, the Wall Street Journal said on Wednesday, citing
people familiar with the matter." Morgan has owned the hotels since 2007.
The two major creditors, Citigroup and Shinsei Bank are reportedly trying
to get Morgan to put more equity into the property. According to the report: "Another
lender, Singapore sovereign wealth fund GIC, is interested in taking over
the hotels from Morgan Stanley and is currently in discussions with the
other lenders, the paper said, citing one person."
Stimulus package expected to increase its footprint. According to The
Wall Street Journal: "Infrastructure spending is set to step up in the second
year of the stimulus program, which should mean more money flowing to private-sector
employers. Still, economists say that won't likely have a big effect on the unemployment
rate, which most say is likely to continue a slow decline as the broader economy
recovers." According to The Journal: "Most of the money allocated to specific
projects hasn't been paid out yet, and there are still an additional $195 billion
in tax cuts on the way."
Big money walks away from green house lobbying effort. According to The
Wall Street Journal: "Oil giants BP PLC and ConocoPhillips and heavy-equipment
maker Caterpillar Inc. said Tuesday they won't renew their membership in the
three-year-old U.S. Climate Action Partnership, a broad business-environmental
coalition that had been instrumental in building support in Washington for capping
emissions of greenhouse gases. The move comes as debate over climate change intensifies
and concerns mount about the cost of capping greenhouse-gas emissions."
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The S & P 500 (SPX) rallied on Tuesday while dollar sensitive multinaltional
stocks showed strength. The question now is whether these stocks can rally if
the dollar's pullback was just a short term, one day blip.
Chart Courtesy of StockCharts.com
Johnson & Johnson (NYSE: JNJ) and 3-M (NYSE: MMM), two of the multinationals
we featured here before the market opened on Tuesday, had good days, rallying
along with their Dow Jones Industrial average counterparts.
Chart Courtesy of StockCharts.com
There are lots of aspects of this market to keep in mind. First, the S & P
500 closed just below 1100, a key resistance level, which means that buyers and
sellers may be waiting right above the chart point. If the sellers win, the rally
will fail. If the buyers win, then we should see more gains in the index. What
that means is that investors need to be paying special attention to that key
chart point.
Chart Courtesy of StockCharts.com
So far, the S & P has moved above its 20-day moving average. That means that
the short-term trend is now up. That could easily change, so it’s not as meaningful
a gauge at the moment. More important is what happens at the 50-day moving average,
the dividing line that defines the intermediate term trend, the direction that
stocks are likely to take over the next several weeks to perhaps month. That
line is just about at 1100, which makes that chart point doubly important, on
its own, and also as the measuring gauge for the intermediate term trend.
Now, the dollar issue becomes important. Large multinational companies such as
Johnson & Johnson and 3-M make more money when the dollar is low in value.
Their overseas sales rise as American goods, due to the lower dollar are cheaper
in overseas markets. Also important is the effect of the lower dollar when companies
bring money back to the U.S. as earnings rise. Both stocks went up on Tuesday,
as the dollar went down, just as you would expect.
Chart Courtesy of StockCharts.com
This is not very surprising though, as even though the dollar has been rallying
lately lately, due to Greece's problems, shares of U.S. companies that rely on
global sales for a significant portion of their earnings have been steady. That
means that some in the market have been expecting the dollar rally to moderate
in the short to intermediate term.
Looking back, we also saw that when the dollar's rally picked up steam in January,
both JNJ and MMM rolled over. But over the last few days both stocks have started
to consolidate. This has coincided with a slight stall in the dollar. Over the
weekend, as the E.U. has agreed to give Greece a month to get its fiscal house
in order, the relationship between the large U.S. exporters, such as JNJ and
MMM seems to have resumed, as a lower dollar has boosted the shares of companies
that make more money with a weaker dollar.
If these two stocks and others in the Dow Jones Industrial average start to sag,
especially if the dollar picks up steam, it will be a signal that the rally in
the dollar is likely to resume. On Tuesday, that was not the case. If you are
an investor in the dollar, this is an opportunity to consider taking some profits
or make sure that your time frame for holding on to dollar investments is for
a fairly long period of time.
Conclusion
The long term trend favors the U.S. Dollar. That's because the U.S. economy,
despite all of its problems, seems to be bouncing back better than Europe. The
U.S. has had its proprietary crisis. And although there are still other shoes
to drop, more foreclosures, upcoming potential problems in commercial real estate,
and lots of issues in Washington, Europe has only had the fallout from America's
problems.
Greece, Spain, and Portugal, are Europe's own problem and they haven't happened
yet. And while Spain and Portugal may get by, Greece does not look as if it's
going to go away quietly.
So the key is what U.S. stocks do, especially if the dollar starts to strengthen
again. If the multinationals continue to rally, despite a strong dollar, we can
surmise that the trend in U.S. stocks may be much stronger than we thought.
Still, above all, it will pay to keep a very close eye on all investments at
this point, given the potential for surprises being on the rise.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
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Shares of Google
(Nasdaq: GOOG) seem to be bottoming out.
Chart Courtesy of StockCharts.com
The dollar has been getting the attention, but Google looks
to be getting a bit of sponsorship. The stock dropped some
17% is about six weeks. But since early February it has
bottomed and has fought its way back to just below its
20-day moving average.
The stock is well oversold and has gotten some positive confirmation from the
MACD and RSI oscillators, which means that money is moving back into the shares.
Volume is starting to rise on up days, which is also a positive. And there is
virtually no real news on the stock, which means that money is coming in because
buyers like the price at these levels.
Two things have to happen to make this more than a short term trade. One is a
good close above 550. The other is that the stock take out the 580 area eventually.
For now, though, if you have a short term time horizon, Google may be a place
to look.
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