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Daily Forex Blog: Technical Indicators Suggest More Equity Weakness and USD Strength

Tuesday, 08 December 2009 19:20

Yesterday, Bernanke opened his mouth and the USD gained support on his less than optimistic outlook for household spending and continued economic growth. If this came as a surprise to anyone watching the latest push in the Equities market, they were most likely under a rock or are one of the lucky few who refuse to see the writting on the wall. Corporate earnings growth was not keeping up with the push higher, and sooner or later people will begin to question the price at which they are getting their shares against their expected returns.

On a technical level, the DJIA has tried six times in the last 2 weeks to crack 10550 and has failed. Though the index remains within striking distance of that figure, it's ability to do so is being slowly eroded by USD strength, FED expectations for higher interest rates by mid 2010 and a deluge of indicators suggesting weakness, RSI inability to close higher as price move higher, MACD crossover downward, Slow Stoch Bounce off of trigger line, tightening of the Bollinger Bands are just a few examples.

Take the time to look at these and then add the fundamental talk down of USD weakness and the USD may be in for a few months of strength, if not sideways action. I have been calling for USD to close the year where November opened. Coincidentally, the USDINX is only thirteen points below the November open of 76.36 as I write this article. Hourly overbought indications may keep the index soft into tonight but I can easily see a test of 76.50/81 in the coming days, sending the equity markets further down.

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