Watch The Dollar!

The FOMC decided not to hike rate in its last meeting and the US dollar should start to come down. Although there are talks of possible rate hike by the end of the year, those talks will likely vanish after the Q3 earnings come out next month and showed how the strong dollar has negatively impacted corporate earnings. If there are any hints of possible spending cut and/or reduction-in-force (RIF or layoff) from reporting companies, that will further dismiss any thought on the possibility of a rate hike in 2015.

In the short term, the market will adjust to the FOMC’s latest rate hike decision. The stock market will take its cue from the US dollar. Therefore, watch the direction of the dollar. If it reverts downward, then the stock market and commodities prices could move up.

Here are some short term levels to watch on the SP500 in the coming days: potential resistance at 1993.48 and 2040.24, short term potential support at 1948.04 and 1903.07

SPX - intraday

(click on the chart to enlarge)



Here are the corresponding levels for the SPY: potential resistance at 199.84 and 204.40, short term potential support at 195.45 and 190.73.

SPY - intraday




A sector that is sensitive to the US dollar is the semiconductor. Keep a watch on SMH.

SMH




Here is a weekly chart of the US Dollar Index Futures. Watch the two levels on the chart for clues on the direction of the stock market.

DX_F (US dollar index futures- weekly)