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FirstAlert(tm) Digest 8/4/10: Dollar Least Confusing Market Indicator

- Analytical Market Commentary -

August 4, 2010 (FinancialWire) (By Joe Duarte) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.)The S & P 500 SPDR ETF (NYSE: SPY) is struggling to break out, but the Dow Jones Industrials Diamonds ETF (NYSE: DIA) has already done so, suggesting that the weak dollar may be starting to play a greater role in the thinking of traders these days.

The dollar reflects the market’s expectations for U.S. interest rates, the status of the U.S. economy, and the expectations for policy coming out of Washington. Thus, the nearly straight down course for the greenback over the last few weeks suggests that traders are expecting low interest rates for a long time ahead, as well perhaps a slowing in the U.S. economy, and no significant change in the policy direction coming out of Washington anytime soon.

That’s why the Dow Jones Industrial average is starting to break away from the other major indexes. The companies in the Dow tend to be large multinationals, which make more money via exporting their products when the dollar is weak. This is especially noticeable when you compare the action of the Dow to the small stock index, the Russell 2000, which is nowhere near a breakout since the market’s recent and very tenuous bottom a few weeks ago.

The notion that the Federal Reserve is about to find a creative way of easing monetary policy further is one thing keeping stock traders in a more positive mood. The other, at least in the short term is that this is the first week of a new month and that new institutional money is coming into the market. Yet, somewhere in between is the low dollar, which is a longer term influence on traders.

So, the two things to watch for are trading volume and what happens as this week progresses. If volume continues to rise on up days for the markets, that’s bullish. If the market sells off and volume picks up, it would be very negative. Friday's unemployment report will be casting its shadow over the market by Wednesday, as the private industry employment reports start to stream out. And Thursday, we get jobless claims.

The first glimpse into the employment situation was the ISM manufacturing index's employment component, released Monday. That was positive, coming in at 57.8, having grown for 8 months and picking up its rate of growth. Other parts of the survey, though, were showing signs of decline, especially new orders, production, inventories, and backlog of orders, suggesting that even if we get a bump in the employment situation in July, it may not last.

The bottom line is that we'd like so see more volume on days in which the market rises, and that Friday, as has been the case for a long time now, will be a market moving day after the employment report is revealed. For the longer term, though, the action in the dollar will likely be the most lasting influence on the stock market.

(Go to http://www.financialwire.net/?s=joe+duarte to see more commentaries by Dr. Joe Duarte, and go to http://www.financialwire.net/2010/04/22/about-duarte/ for more about Dr. Duarte.)

Today’s FirstAlert is underwritten by ShareIntel(r) Shareholder Intelligence Services** (see below).

The FirstAlert(tm) Economics Calendar lists ADP Employment for July (8:15 a.m.), Treasury Refunding Announcement (9 a.m.), ISM Services for July (10 a.m.), EIA Petroleum Inventories (10:30 a.m.).

The FirstAlert(tm) Earnings Calendar highlights BigBand Networks BBND, Bionovo Inc. BNVI, Brightpoint, Inc. CELL.

FirstAlert(tm) Website of the Day: http://www.antopia.com/

Quote of the Day: "All music is folk music. I ain't never heard no horse sing a song." Louis Armstrong

Word of the Day: minim \ MIN-uhm \ , noun; the least quantity of anything.

In context: "He examined the sprocket areas of the film searching for a speck of data, a minim of missing imagery." — Don DeLillo, Underworld

Today is: Coast Guard Day.

Happy Birthday: Louis Armstrong (1901, d. July 6, 1971)

Today in History: The U.S. Coast Guard was established in 1790.

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**FirstAlert(tm) is underwritten by Investrend Communications. Today’s Investrend featured partner is ShareIntel(r) Shareholder Intelligence Services: Manage Wall Street. Don’t allow Wall Street to manage your company. Know who’s holding, buying and selling your company’s stock.  Don’t “fly blind.” Know who’s buying your competitors’ stock.  Don’t miss opportunities. The publicly-traded market offers great potential rewards, but those rewards don’t come easily.  Today’s market landscape is tougher to navigate than ever before − and it’s simply a fact that numerous companies do not survive. That fact is even more true for lesser-capitalized and development-stage public companies. The ShareIntel(r) program provides concrete, actionable solutions that give such companies an immediate and formidable competitive advantage. Without liquidity and a properly-valued, protected share price, a public company is enjoying none of the benefits of being a public company while still having to do all the work of being a public company. That’s the bottom line:  Liquidity.  And a properly-valued, protected share price. ShareIntel(r) suite of solutions gives a public company what it needs to accomplish those key objectives − and to thrive, instead of just survive. For more information write to resources@investrend.com with “ShareIntel” in the subject line.

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FirstAlert(tm), published exclusively by FinancialWire(tm), was created by Gayle Essary, founder of Investrend Communications, Inc., parent of Investrend Information. The opinions expressed in FirstAlert(tm) do not necessarily reflect the opinions of Investrend or of FinancialWire(tm).

FinancialWire(tm) is committed to serving the financial community through true journalism and providing relevant resources to investors. Standards-based, independent equity research on numerous public companies is available through the Investrend Research Syndicate (http://www.investrend.com/reports) written by FIRST Research Consortium (http://www.investrend.com/FIRST) member-providers. Real-time, streaming research for companies and funds mentioned in FinancialWire(tm) news is available via the Investrend Research Syndicate, courtesy of Stock Smart (at http://investrend.stocksmart.com/ss/html/hpcompany.html). Free annual reports and company filings for companies mentioned in the news are available through the Investrend Information Syndicate (at http://investrend.ar.wilink.com/?level=279). FinancialWire(tm), in cooperation with the Investrend Broadcast Syndicate, also provides complete, daily conference call and webcast schedules as a service to shareholders and investors via the FirstAlert(tm) Network’s “FirstAlert(tm) Daily” webpage (at http://www.financialwire.net/news-alerts/).

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