Markets in Full Rally
Aug
12
Written by:
8/12/2008 8:39 PM
Markets in Full Rally
You may not have noticed today as a couple of financials led
the markets lower but all four of the major averages have now triggered a buy
signal. The Nasdaq Composite, The Dow Jones Industrials, The Russell 2000, and
the Standard & Poors 500 are all signaling a rally has begun.
The Dollar and Oil
The US
Dollar is the main reason the market has picked up. A number of financials
bottomed out during earnings season but the rally in the US Dollar has caused
commodities to fall and the markets to move. The Federal Reserve has been
helpful keeping rates low instead of raising them in the face of record oil
prices. But the strength of the dollar has caused all commodities like oil,
coal, gold, and agricultural products to fall dramatically. Lower commodity
prices will allow rates to stay low and the consumer to spend more of their
income on domestic products instead of energy.
Europe and China Are Worse than the US
Since
currency values are pegged against each other, the US Dollar has also been a
benefactor of the weakness in Europe. As the
European bank raised rates, the Euro fell and money moved back into the US
Dollar. China
has also been helpful to the dollar as the economy is in a tailspin with the
Olympics soon to end and investors questioning the future growth in the
communist nation. China’s
weak stock market has also freed money for US stocks and an increased interest
in their safer securities.
The Trade
At this
time you could eliminate all short positions and begin to build new positions
in the best stocks of the best industries. Industries that have done well of
late include Gaming/Casinos, Diary Products, and Restaurants.