Standing By

The market continues to trade sideways. The Dow Jones Industrial(DJI), SP500(SPX), Nasdaq 100(NDX) are all trapped in a trading range. The only index that appears to be making a move is the Russell 2000(RUT). The Russell 2000 has been strong relative to the other indices, but it also is trading within a trading range. As the holidays approach, trading volume will start to lighten and one needs to be very careful on false breakouts.

(Click on the chart to get a larger view and for the commentary)

DJI:



SPX:



NDX:



RUT:



The US dollar continues to gain strength. A short term consolidation from recent move is not inconceivable. The recent price actions on the dollar indicated the low for the dollar in this cycle has been made. The catalyst to watch now is the unwinding of the dollar carry trades. Energy stocks could get hit as commodities related carry trades unwind and oil prices retrace below $70 a barrel. Gold and gold mining stocks can also get hit as the carry trades unwind. How much gold prices will retreat is depending on how the market perceives the threat of future inflation. If the market is more concern about the threat of inflation than the strength of the dollar, then gold could be shielded from the unwinding of those carry trades.

DXY:



UUP:



OIH:



I will be standing by if there is significant development in the market that warrants me to put up another post before the holidays break. Most likely this will be my last post before Christmas and I like to take this opportunity to wish everyone a merry Christmas and a happy holidays.