Look at that resistance line. This looks to be strong and might be hard to overcome without a strong catalyst. I’m currently invested in the I Fund, so I will be watching this closely.
I saw this interesting post on Bespoke that is relevant to what I am talking about……….
The Falling Dollar and Its Impact on Stocks
The third quarter was a boon for stocks, but it was a bust for the US dollar. Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%.
While a lot of investors don’t trade in currencies, their price movements can have a big impact on equities. When the dollar is rallying, companies that generate a large portion or all of their revenues inside the US benefit, while companies that generate a large portion of their revenues outside of the US benefit when the dollar is falling. At
Bespoke Premium, we have a unique database that highlights the percentage of sales that each company in the S&P 500 and Russell 1,000 generates both inside and outside of the US. Had you just owned the S&P 500 companies with more than 50% international revenues since the dollar peaked in early June, you would have outperformed the average stock by more than 350 basis points. Had you just owned the S&P 500 companies that generate all of their revenues inside of the US, you would have underperformed the average stock by 226 basis points.
Earnings season starts next week and companies will be releasing their Q3 numbers. With the big fall in the dollar in the third quarter, the revenues of companies with heavy international exposure should look pretty good. One has to wonder how much of this is priced into these stocks already.
Regardless of which way you think the dollar is going, you can use our International Revenues Database to find stocks that should benefit from your view on the currency.
If you think the dollar is in store for more declines, you can easily find the stocks with the most international exposure. If you think the dollar is due for a bounce, you can pull up all the domestic names. If you just want to know what the revenue exposure is for the stocks in your portfolio, you can pull this information up easily for each one.
The point is that the I Fund has had a really good run. It might be needing to take a breather and pull back some. Be alert!
And finally, from Ticker Sense……..
S&P 500 Levels to Watch – Possible Golden Cross
Back on September 14th (link to post) we suggested that the third time could be a charm for the S&P 500, and a few days thereafter it broke through previous resistance at about 1125. Now comfortably above the 200-day average and having held the 1125 level the market is pausing at 1150. 1150 is a short term high from January and also the 176% projection level from the March-09 – June-09 Fibonacci Projection. Technicians are watching it closely and based on the chart below their actions are having an impact. Look for a close above 1150 to confirm the recent uptrend.
On different, but still technical, note: the 50-day average is now rapidly approaching the 200-day. Shown below, it is going to take a significant sell-off to avoid a golden cross. (We wonder if or when this point is going to come up in the media.) The bottom line is that we’re in a new month and a new quarter, momentum is to the upside and look for a big move either today or Monday which will set the trend for the rest of the month.
