The Invesco DB US Dollar Bullish ETF (UUP) remains above important support at the $26 level and in an overbought position. UUP is below the declining long-term trend line and Chaikin Money Flow has turned bearish. Further strength on the part of the dollar would likely be a headwind to the broader commodity complex.
Take Away: The song remains the same after equities rallied in pre-holiday trading last week. SPY continues to hold key support which keeps the uptrend from the March 23rd lows intact. QQQ remains the best game in town as the fund traded to another new high on Thursday.
Two key developments, that are closely related, and which we are watching closely are the dollar and commodities. Should the dollar break below key support, commodities would likely move strongly higher which could be a positive for areas in the equity market that are leveraged to hard assets.
Market Commentary / Looking Ahead
US equities closed higher in Thursday trading but off the best levels of the day. The theme in the market remains largely unchanged as better than feared economic reports are overshadowing the continued rise of COVID-19 cases in the US. Treasuries were unchanged to stronger at the short end of the curve. Dollar was stronger on the major crosses. Gold finished up 0.6% WTI crude settled up 2.1%.
- Outperformers: Materials +1.85%, Energy +1.13%, Industrials +0.80%, Healthcare +0.71%, Tech +0.50%, Consumer Spls. +0.47%
- Underperformers: REITs (0.37%), Communication Svcs. (0.07%), Financials +0.07%, Utilities +0.23%, Consumer Disc. +0.39%
S&P futures are up 1.2% to start the week. Asian markets were higher overnight with China up nearly 6%. Hong Kong was up nearly 4%, while Japan, Taiwan and South Korea also rallied. European markets are also seeing strong gains. Treasuries are mostly weaker with the curve steepening. The dollar is stronger vs the yen but weaker vs the euro and sterling. Gold is down 0.3%. WTI crude is up 0.3%.