October Still Looks Strong For Stocks [Dow Jones Industrial Average, SPDR S&P 500 ETF Trust]

octoberGeoff Garbacz: The key for many stocks moving forward from their current levels is the U.S. dollar. As I’ve been saying, it’s the biggest reason why stocks and commodities have been struggling these past few months.

The U.S. dollar has been on a tear recently. And although it’s eased up slightly in the past few days, the run doesn’t look like it’s ready to end just yet.

The currency is in what I refer to as “el fuego” mode, and I continue to believe it could stay that way for longer than most think.

To reiterate, if the PowerShares DB U.S. Dollar Index Bullish ETF (UUP) breaks out above its multi-year resistance at $23.14 then a move to $24 could be in order.

Already the recent trading action in the U.S. dollar has translated into the best percentage up move in 17 years. UUP closed last night at $22.77, just slightly off its $23.08 high made Friday, Oct. 3.

However, don’t let a rising dollar deter you from buying stocks. That’s because the tide is looking to turn, and I’m already eyeing some new buys for the fall at or near the lows.

Now that the September Selling is Over …

Last week I mentioned there were 13 down days for September on the S&P 500.

September 2014 was quite the ugly month … and the worst from a “number of down days” standpoint since August 2013.

The problem with September was what I call the “September Paradox.” As we come into September every year, the mutual funds have to decide what to sell and take losses in to lower the capital gains tax.

They sold hard in September, and the markets have felt the effects … especially the small caps.

A Bigger Struggle for Smaller Stocks

The worst case for the Russell 2000, via the iShares Russell 2000 (IWM),continues to be playing out — which is a retest of the May low at $107.44.

I have been trying to give the IWM the benefit of the doubt here but it is getting close to where I move to a negative from neutral opinion.

My negative view has not been activated, with the break of $107.74 failing to stick with Wednesday’s close.

IWM closed at $108.97 Wednesday

Finally Some Good News for Gold?

One of our open buy ideas is gold via the SPDR Gold Trust (GLD), which I introduced this summer at $126.53. It is lower at $117.47.

Gold is stuck in a range here of $114 to $126 but a breakout may be forthcoming, as it has now almost completely retraced its entire move from Dec. 31, 2013.

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