Daily update 7/17 The dollar

Kind of a freaky day.  With SPX only down two points breadth was -70% early on.  Big up moves in very big cap stocks GOOG and FB lifted both SPX and COMPX/NDX100/QQQ. 

It was a very narrow range today.  Breadth ended at -64%.  What makes today a much more negative day then it appeared was new lows increasing to 193.  At the same time new highs dropped to only 75.  This with SPX only four points below its all time high close.  That cannot be healthy.

The futures are getting very extended from both the 50 and 100 SMAs.  ADX is turning up slightly, but it is still on the floor indicating the trend is very weak.  Funny it looks strong doesn't it.  That is why I like that indicator.  It really does a good job of measuring the strength.  We have arrived at the highs.  What happens now?

In another sign of how odd today was check out this chart.

The number of SPX stocks above their 200 MAs actually fell today.  This market is getting extremely thin.  People are gravitating to those few stocks still doing well with their earnings.  I saw that at the last two tops in 2000 and 2007 as well.  The interesting thing is that action causes a few stocks to go up big and that seems to make many people think the market is really bullish.  However, the opposite is actually true.  It is really a sign of how thin the market is.  The money is flowing into very few stocks which causes outsized moves in those stocks. 

July is full of price highs because Aug. and Sept. are often negative months.  With new highs dropping and new lows so high it will be tough for this market to keep going up.  Next week earnings pick up considerably.  That could shake things up a bit.  For now the bulls are in control, but I will be watching closely.  I think this bounce has limited legs and when it rolls over it could roll over in a big way.

The dollar index has been rallying for a while.  Here is a look at the daily chart.

The dollar index has managed to get up to key resistance.  While it may consolidate/pullback some here I expect it will get through it.  That should set up a test of the highs.  This looks like a bullish double bottom basing pattern forming.  After the strong rally we had I would expect it will get to  new highs and beyond eventually.  That would likely be bearish for big cap stocks that get a lot of revenue from overseas. 

I thought these were good comments on the Greece situation.

It is worth reminding readers that nothing has been resolved in Greece other than the passage of a bill that will impose harsh austerity measures for the country in exchange for a "loan to pay principal and interest payments" back to the people who loaned them money in the first place. This is the equivalent of "paying a credit card with another credit card." It keeps the bankers happy but keeps the individual broke.  - Lance Roberts

The market and sector status pages have been updated.  Have a great weekend.

Bob