The sell the dollar trade finally reversed today and in a major way. This of course led to the big equity sell off. Today was no more about fundamentals than the previous 180 days. Simply, the short dollar buy everything else reversed. The dollars move was very violent and it has the potential to be just getting underway. Everyone and their dog has been hating and shorting the dollar. I have been shorting other currencies waiting for this thing to reverse because when the trade gets this crowded, it can't last forever. The reversal may have started. Time will tell.
The financial media didn't really cover it but I suspect the big dollar reversal may have had something to do with the ING annocement. Basically this European services giant is getting split up and the company is going to try and raise $11.3 billion dollars. ING shares went down 18% in Amsterdam.
So now what? The equity markets look very broken. The dollar has reversed and is now up three days in a row but there are some things that are bothering me. So far high yield debt really hasn't sold off. It is hanging in there very strong. Secondly, the big bull trendline from March has yet to be broken for the S&P 500 or the NASDAQ. This has been major resistance many times before and before everyone can jump on the bandwagon that the market has topped, at a minimum these indices need to break this trendline. Instead of a dramatic top this top looks like it is becoming more of a rolling top with pieces of the market slowly peeling away from the rally. Tech is so far hanging in there. Time will tell if that gives way.
What looks the weakest is big banks. If these guys really start to give ground, watch out. It will be just a matter of time before the rest of the market catches up.
By the way, that trendline for the S&P passes through 1052 tomorrow and 1055 on Wednesday increasing about three points a day. That is what needs to be watched.
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