Ralph Shell's  Instablog

The volatility in both equities and the dollar continues, this time with stocks higher and the dollar lower.  Yesterdays venture under the 1.47 handle was brief and the trip back to the 1.4840 level was quick.  Stocks through out the world were strong coming into our session, but we had some fundamental inputs that gave our market a boost.  The US non farm payroll shows an improvement because, though losing jobs, we are not doing it as quickly.  The US Service PMI did came in lass than expected at 50.6, down from the expected 51.5 and less than last period's 50.9, but the market shrugged off the bad news.

The markets are awaiting the FOMC notes to be released this afternoon.  Near term rates are expected to remain unchanged, but the analyst are eager to dissect every word and phrase, trying to find a clue when the Fed will begin to tighten.  This analysis is meaningless. 

Yesterday the Democrat Party had big losses in Virginia, a state that was a big Obama supporter only a year ago.  In New Jersey, which is probably 65% Democrat, the the incumbent Democrat Governor, who spent millions to get reelected, was given the boot.  Yes democracy is a fickle employer.  While the White House feigns indifference, the are certainly aware that continued high unemployment will send some of the new arrivals in Washington packing.  Unemployed Americans turn out to vote in droves.  Many of the holders of dollars and US Treasuries cannot vote in US elections.  So if cheap rates help employment but hurts the dollar, a weak dollar it will be, despite the administrations  platitudes about a strong dollar.

The weekly calendar is loaded with additional meaningful reports prior to the end of the week so there is no reason the market will settle down.  We are currently trading at 1.4830, again testing the resistance above 1.4850.

The market cleaned out the stops under the 1.47 and promptly rallied.  Now that we are at the top side of the range, cleaning out the stops above the market seems likely.  This is a market for the quick and nimble.  We prefer to watch for a few days.