Byron Wein was on CNBC this week saying investors were
euphoric and a market correction was right around the corner.
"Euphoria" and "correction" are strong words, but the case for
a near-term pullback isn't a bad one at all. For now, the 50-day
simple moving averages for the Dow, S&P 500 and Nasdaq
Composite are the line in the sand.
As of Thursday's close, a pullback of nearly four percent of
would take the Dow and S&P 500 down to their 50-day lines at
13,410 and 1,454 respectively. A three percent pullback for the
Nasdaq would take it down to its 50-day line. It would take some
fairly dire market headlines for indices to break below this key
support level with conviction -- not a likely occurrence at this
point, at least in the near-term.
Plenty of market pros have been making the case about why a
market pullback is imminent. In recent days, volatility has
increased as evidenced by wide-and-loose, erratic intra-day price
swings in the major averages.
After a big run for a stock or an index, price action like
this can often mark a top. There's also been talk about lukewarm
corporate earnings and sluggish economic growth in the U.S. and
Europe. Oh, and don't forget about recent data from Hulbert
Financial Digest that show newsletter writers are recommending
record exposure to stocks. Bears love this data because it's
Market bears are also licking their chops over recent strength
in the U.S. Dollar.
The U.S. Dollar Index jumped 0.6 percent Thursday to 80.19.
Its 50-day moving average had been resistance since Jan. 18 but
not anymore. The greenback stopped just short of breaking out
over a descending trend line Thursday. A new potential resistance
level is its 200-day moving average at 80.87. If money continues
to rotate out of the Euro and into the dollar, it could weigh on
the market in the near-term.
Continued strength in the dollar, however, is far from a sure
thing. The CurrencyShares Euro Trust (NYSE:
) continues to hold above its 50-day moving average at $131.29.
It closed Thursday at $132.92, down 0.9 percent.
On Thursday, the European Central Bank (ECB) left rates at a
record low of 0.75 percent, but ECB President Mario Draghi
acknowledged that continued strength in the euro could harm an
economic recovery. The comments mean that further rate cuts in
the region aren't out of the question.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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