Stocks opened higher but slid back to breakeven as a strong dollar renewed pressure on the equities market. The EUR/USD is making new lows again after a recent relief rally. It is worth making this part of your daily routine because there are implications to the markets given the close inverse relationship between the USD and US equities. If you don’t have direct access to currency market data, UUP is an ETF that follows the dollar.
Earnings season is kicking off this week and it will be interesting to watch the market’s reaction to both the Euro and US earnings. Will these two forces offset each other or join ranks and shove the markets the same direction? Rates on European sovereign debt from the periphery are creeping higher again, eliminating any margin of safety. No doubt this is part of what is pressuring the Euro. Earnings have been a mixed bag, but it is still way to early to make a a call on that.
Right now it feels like the market is stuck in no man’s land as everyone is waiting for it to break one way or the other. There is some air under our feet and a few too many disappointments on the earnings front could drop us materially lower. But on the other hand, a few marquee companies hitting the ball out of the park could ignite a lucrative rally.
The one thing I would like to see confirm new strength is high growth stocks taking leadership again. There are too many defensive stocks showing the best relative strength and for us to have a sustainable move higher we need investor’s hunger for speculative growth stocks come back.
Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.