Dollar Bucks the Fed Rate Cut
50bps couldn't make the dollar drop. Instead it held it's ground. For now. Let's also look at GLD, TLT, ANF, AAPL, QQQJ, and TWLO.
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The Market
The most interesting aspect of today’s market wasn’t the reversal (we’re overbought) it was the US Dollar. I can see you rolling your eyes already thinking here she goes talking about the buck again.
But take a look at the Dollar Index because, once again, it tried to break and couldn’t. Instead, it ended the day higher. It has been my contention for a few weeks that the US Dollar should hold down here, and so far, it has. I don’t know that I will feel that way a few weeks from now, but for the time being, that’s been my view for the last month.
Why does this matter? First, did you see the precious metals today? They, too, reversed. I grant you that GLD had that measured target at 238-240 that we discussed earlier this week and the DSI got to 85, so in my view, it wasn’t ripe for a rip-roaring rally but this goes hand in hand—or usually does.
Then there are the ‘recession’ stocks. Maybe I should call them the staples (but I put the Utes in there, too). I have been harping that I think those stocks have had a good run and profits should be taken. Look at this chart of the buck again.
That rally in the staples and utes started in April, but it accelerated in July—the inverse of the Dollar. So, all these trades are part of the same puzzle.
I have been waiting for TLT to come down and tag this line since it was at 98, so I have been wrong, but interest rates were up today, and I still think that line is in play.
Away from that, breadth was mostly flat, but even when we surged post the initial announcement of a 50 bps cut, the number of stocks making new highs did not exceed the reading from two days ago. I believe that is the overbought-ness.
Finally, the VIX was green, and even when stocks were up it was hard to get the VIX to red and stay there. I don’t know what the next few days bring, but I continue to think we’re due for a bout of volatility as we head into the end of the quarter.
New Ideas
I was asked about Abercrombie & Fitch ANF a few weeks ago, and I was not a fan, but I would like to follow up and note that the stock has not broken 130, so if it can hold 130 into this overbought pullback, then I think the risk/reward down there is decent for a rally.
Today’s Indicator
The Volume Indicator is overbought.
Q&A/Reader’s Feedback
I don’t have a strong view on Apple AAPL except that it held 215 on the news that sales are lower than expectations earlier this week. But now it filled the gap. The bottom line is it that it feels as if it is in the middle of nowhere. Should the stock go sideways and hold 215 for the next few weeks then I would lean toward a more positive view.
The question is if there is a measured target for QQQJ. Because the numbers are small, the initial measured target is 31-32.
I was asked to follow up on Twilio TWLO, a stock I liked for a base builder about a month ago. Instead of going up, it went down but now it is back to where I liked it. I still see a potential base here, but I would like to see it stay over that low around 57.
