Chart o’ the Day: The Dollar’s Impact on the S&P 500

Here’s a really key insight from my friend Ari Wald, technical analyst at Oppenheimer Asset Management…

You’re hearing a lot about divergences right now because the internals on the S&P 500, here at all-time highs again, are blatantly bad. The same is going on market-wide. Only 65 percent of the S&P 1500’s stocks are above their 200-day moving averages (or, in strong uptrends) vs the 80 percent reading we saw during the July high.

Two caveats:

1. We’ve seen this divergence before this year, it’s resolved itself to the upside each time as the “market of stocks” eventually caught up with the stock market in the end. Guys fading the market’s price this year because of its internal signals have been repeatedly burned. In some cases, a plunge in stocks above their 200-day moving averages has even been a buy signal, rather than a sign of imminent breakdown!

2. Upon closer inspection, it’s really two sectors driving the weakness – as Ari reveals, oil stocks and commodity names are the reason why there are significantly less stocks currently in an uptrend. He looks at the S&P 1500 below to capture the mid/small markets as well here, but the same applies for the big caps.

Here’s what’s really going on:

We use the % of stocks above their 200-day m.a. as a proxy for the % of stocks in an uptrend,
and unconfirmed readings are a concern. For instance, the S&P 500 is out to a new all-time
high, but the % of stocks in an uptrend (S&P 1500) has dropped to 65% vs. 80% in July.
On closer inspection, Energy (32% fewer stocks in an uptrend since July) and Materials (22%
fewer stocks) have been chief sources for this decline in participation as a strong US dollar has
weighed on these commodity-related sectors.

Screen Shot 2014-09-22 at 7.44.23 AM

Josh here – as you can see, the 15 percent drop-off in uptrending stocks is being skewed much higher by a handful of sectors. These sectors are being largely impacted by the strong dollar trend. I’d throw in the industrials into this as well – they have to sell their products / services overseas and a stronger dollar makes them slightly less competitive.

The big story of the late summer, early fall so far is the rally in the buck. This just gives you one more reason to follow it.

Source:

Technical Analysis: Inflection Points
Oppenheimer Asset Management – September 22nd 2014

Follow Ari Wald on Twitter!

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Tuesday Morning Links | timiacono.com commented on Sep 23

    […] strikes knock European markets – AP Fear factor: Investors are scared again – CNN/Money The Dollar’s Impact on the S&P 500 – Reformed Broker Would a Repeat of the 1987 Crash Be That Bad? – Wealth of Common […]

  2. click here commented on Sep 14

    … [Trackback]

    […] Read More on that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  3. eatverts commented on Sep 22

    … [Trackback]

    […] Here you will find 82935 more Info to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  4. immediate edge scam commented on Sep 22

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  5. bitcoin era reviews 2020 commented on Sep 23

    … [Trackback]

    […] Read More on to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  6. british dragon reviews commented on Nov 14

    … [Trackback]

    […] Here you can find 90430 additional Information on that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  7. 19올넷 commented on Dec 28

    … [Trackback]

    […] Here you can find 29300 more Information on that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  8. watchesbest commented on Jan 07

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  9. knockoff watches commented on Jan 14

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  10. human hair wigs commented on Jan 15

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  11. Digital transformation solutions commented on Jan 18

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]

  12. try this website commented on Feb 04

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2014/09/22/chart-o-the-day-the-dollars-impact-on-the-sp-500/ […]