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MV Weather Report: S&P is Singing in Dollar's Rain

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Rain or shine, we reivew the day's biggest stock stories.

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It seems like commodities are in style once again. Last week gold was the story, and this week its crude oil making a large move.

Black gold finished the day higher by 4.85% to 71.30. While the yellow metal shot through the all important 1000 level before settling down and finishing the day lower by -0.9% to 995.80.

The strength today was in the commodity stocks: Transocean (RIG), Chevron (CVX), Freeport McMoran (FCX) to name a few. Tech was also strong as Baidu (BIDU), First Solar (FSLR) and Apple (AAPL) traded higher.

The main reason for the strength in commodities was the dollar which was off by 1.10% (compared to the Euro). A weak dollar typically helps the S&P 500 rally and it did so today. The popular average was higher by 0.88% to 1025 and just like that the S&P is almost back to the highs of last week.

Today on the Buzz and Banter, Professor Rod David believes the pattern in the S&P 500 is very similar.

"Here it is one week later, with S&Ps having retraced the entire drop, and no substantial positive developments in the interim. Yet, the drop's cause remains unresolved.

"Without a scapegoat to blame for the decline, its effect can't be valued. That's why price continued dropping, waiting for a second shoe to drop. But nothing ever did - at least, not justifying such a steep and deep slid. Tuesday's slide initially extended, and price didn't firm until late Thursday. Friday's rally tested "higher prior lows," which had been defining the prior range's lower-end.

"It's entirely natural for support to become resistance after a breakout, and unnatural for a correction not to test it. But the bounce extended higher since Friday's close. what if those extra gains since then were only in sympathy to global markets recovering during Labor Day? What if their gains were based on U.S. gains? Isn't this the definition of a bubble?

"Sellers had ripped a hole in the market, but failed to step through it. The market, like nature, abhors a vacuum, so it sucked in buyers to fill the void. They can still leverage that into a bigger recovery, by resuming the rally today. Otherwise, the drop might yet resume today, or within minutes of tomorrow's open."


Rod brings up some great points but we can't ignore that after every selloff, the market recovers and moves to a new high for the year, and then people become more bearish. This time looks no different; one sharp down day, a few follow through down days then the market recovers. Should we expect this time to be any different?

Hope everyone had a great weekend, have a good night!

Position in GDX

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