U.S. Equities Erase Late May 2012 Gains As Short Term Dollar Decoupling Occurs:
Stocks fell yesterday with traders opting out of long positions as housing news was dim and dollar gains were slight. We told our readers yesterday maintain a defensive posture and not get sucked into a short term bear trap brought on by extreme oversold positions. Oversold conditions are a temporary reaction to extended price decreases that are abnormal, but can be part of a longer term trend.
Housing sales decreased which didn’t bode well for equities. The index of pending home resales dropped 5.5 percent according to the National Association Of Realtors.
We don’t believe the current market sentiment is based largely in U.S. economic data and news about the euro is dominating trading activity short run. U.S. economic data continues to be mixed and less positive. (more on that later today)
Last week’s rally was by no means an all clear bullish signal.
Stocks need to breakout from the range created last week and today the moved toward the low level of that range. We are watching volatility and are less focused on the dollar.