Daily Forex Insight

Here are some insights from the currency strategists at dailyfx. They cover the fundamentals and technicals of key Forex pairs and other key markets along with some of the key economic news of the day. Today's commentary looks at the dollar and the S & P 500:

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning October 24

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2141, 0.38%	Neutral	Neutral
Nifty	8693, 1.28%	Neutral**	Bullish
China Shanghai Index	3091, 0.89%	Bullish	Bullish
Gold	1268, 0.97%	Bullish	Bullish
WTIC Crude	50.85, 0.20%	Neutral	Neutral
Copper	2.09, -1.04%	Bearish	Bearish
Baltic Dry Index	842, -5.61%	Bearish	Bearish
Euro	1.089, -0.77%	Bearish	Bearish
Dollar/Yen	103.82, -0.32%	Neutral	Neutral
Dow Transports	8027, -0.16%	Neutral	Neutral
High Yield (ETF)	36.84, 0.71%	Bullish	Bullish
US 10 year Bond Yield	1.74%, -3.01%	Bullish	Bullish
Nyse Summation Index	135, -37.85%	Bearish	Neutral
US Vix	13.34, -17.25%	Bullish	Bullish
20 DMA, S and P 500	2149, Below	Bearish	Neutral
50 DMA, S and P 500	2160, Below	Bearish	Neutral
200 DMA, S and P 500	2072, Above	Bullish	Neutral
20 DMA, Nifty	8693, At	Neutral	Neutral
50 DMA, Nifty	8710, Below	Neutral	Bearish
200 DMA, Nifty	8055, Above	Neutral	Bullish
India Vix	13.83, -7.01%	Neutral	Bullish
Dollar/Rupee	66.92, 0.31%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	6	8
Bearish Indications	6	4
Outlook	Neutral	Bullish
Observation	The S and P 500 and the Nifty bounced back last week. Indicators are mildly bullish. Markets are failing at resistance again. Time to tighten those stops.
On the Horizon	Japan – CPI, Australia – CPI, UK – GDP, Euro zone – German CPI, US – Durable goods, Consumer confidence, GDP, Personal consumption, Trade balance
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, dailyfx.com
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 and the Nifty rallied last week. Signals are slightly bullish for the upcoming week. Market momentum and breadth have been showing divergences for months now and sentiment indicators are still highly complacent and a big breakdown will likely start soon. It is interesting to see most risk assets suddenly moving together much like in 2008. This is setting us up for some serious downside unless recent resistance gets taken out soon. The market is struggling to get past its 50 DMA and gold recently made a massive move down which is deflationary. Short term we are oversold but any oversold bounces may not last long. The critical levels to watch are 2150 (up) and 2130 (down) on the S & P and 8800 (up) and 8600 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.

Chart of the Week - Balance Sheet of the US Federal Reserve

The chart of the week is courtesy Charles Hugh Smith and shows the current balance sheet of the FED. The current balance sheet show a total asset base exceeding 4.5 Trillion dollars thanks to a series of quantitative easing (QE). This is up from the 1.0 Trillion mark in 2008 when the FED flooded the world with cheap money via its unconventional monetary policy. Wonder how long this continues?