DOW HITS ANOTER NEW RECORD – BONDS SURGE – US DOLLAR INDEX BREAKS SUPPORT
Comments from Fed Chairman Ben Bernanke sparked a rally on Wall Street and the Dow surged to another record high on Wednesday. The Fed Chairman indicated that inflationary pressures were under control and the economy should continue modest growth. Led by the big banks, the Dow moved above 12700 and recorded yet another new all time high. The price chart shows a series of higher highs and higher lows since early November and the Dow continues to hold above its 50-day moving average. There are no signs of weakness and the 50-day is the first support level to watch for signs of trouble.
YHOO was one of the most actively traded stocks on the NASDAQ Wednesday. Yahoo! moved above its August high and has been strong all year (2007).
BONDS SURGE AND RATES FALL… Fed Chairman Bernanke indicated that the Fed was comfortable with the current level of interest rates and this triggered a strong rally in bonds. The 10-year T-Note Yield ($TNX) fell back below 4.8% and there is now a big resistance zone from 4.8% to 4.9%. This resistance zone is confirmed by the 200-day moving average.
Interest rates have been dropping since the end of January. Interest rate sensitive investments appreciate when rates decline. Utilities (XLU), REIT’s & Bonds are all making a nice move up.
FALLING RATES WEIGH ON THE DOLLAR… The fall in interest rates triggered a chain reaction in the inter-market area. The US Dollar Index fell sharply, the Euro Currency Trust (FXE) rose sharply and the StreetTracks Gold ETF (GLD) extended its gains. The US Dollar Index had been range bound since early January and today’s move broke range support. This reinforces resistance around 85.5. The Euro Currency Trust (FXE) surged above its late January high and broke above its 50-day moving average. The StreetTracks Gold ETF (GLD) has been moving higher since early January and tacked on another 53 cents.
* John Murphy/Stockcharts.com
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