The S&P is having trouble battling the downtrend line from July and the 200 day moving average. It backed off again and is now testing the 50 day moving average. If the S&P can't hold the 50dma, it will probably roll over and test the October low of 1,075. A week ago, Tom DeMark, a well known market timer and creator of the DeMark Indicators, mentioned on Bloomberg TV that he thought the S&P Index (or futures) would rally to 1,330 by December 21, but the overall trend was still down. As previously mentioned in that post, if the S&P can use the 50dma as support, and a bullish catalyst spikes the S&P through that downtrend line and 200dma, $SPX could possibly reach his target. There is another flattish downtrend line (dotted) at the top of the chart that hits around 1,330, and I noticed that the downtrend line from the 2007 high (the ultimate downtrend) hits around there as well. So whether the S&P hits that trend line in the next week or year(s), the point is, there's a possibility it could breakout and exhaust at that trend resistance level. Personally, I'd rather see some technical damage first.
US Dollar Index and Euro Index:
The US Dollar broke above the October and November highs yesterday, which I believe is an important development. The Euro Index broke below the October low. Remember when the US Dollar reversed sharply to the upside in 2009 and broke out in 2010? It was because of Greek default fears and the beginning of the sovereign debt crisis in the eurozone. And then of course we had the flash crash and market correction in April.
So, is today's Dollar strength a safe haven bid preparing for the "end game" of the european sovereign debt and banking crisis (and those exposed in the U.S), as well as economic growth concerns in Europe, China and the U.S.? The US Dollar Index closed at 80.24 yesterday (12/13), and if you look at the long-term chart (sorry it isn't below) the Dollar peaked out at about 90 in 2009 and 2010. The Euro Index closed at 130.35 yesterday (12/13) and the next support levels are 128.91, 125.91 and 119.13.
30-year Treasury Bond Yield:
Just like the S&P, the 30-year T-bond yield is testing a downtrend line from July, but it is trying desperately to break above its 50 day moving average. The index closed at 29.99, so 2.99%. It will be interesting to see if yields move lower again (people buy Treasury bonds) if things turn ugly. Anyone think the yield will breakout? I'd like to know why.
S&P 500 Index
US Dollar Index
30-Year T-Bond Yield Index
Courtesy of Stockcharts.com