This stock market seems to have an illness called schizophrenia. In late September, the major stock indexes declined lower, the Dow Jones Industrial Average dropped by over 1000.0 points only to recapture all of those declines in 15 trading days in the month of October. Ten percent rallies and declines are becoming normal trading ranges these days. In the past, the stock markets would rally higher or lower by ten percent in a year. These are certainly not normal times.

What causes these large wide range stock market swings? Well, there are several things that can affect markets, however, the main catalyst is currency. The major stock markets seem to be moving on the back of currency intervention, mainly the U.S. Dollar. As you all know, the U.S. Dollar is the world’s reserve currency, therefore, most every commodity must be purchased with U.S. Dollars. If you have ever traveled to Asia you may have noticed that most businesses will take the U.S. Dollar for payment before they take their own currency. This tells us that the strength of the U.S. Dollar is what is moving the stock markets around the world.

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Recently, the leading commodity stocks have bounced higher as the U.S. Dollar Index sold off. This morning, the U.S. Dollar Index is trading higher and just about every leading commodity stock is selling off today. The only commodity that is not declining lower today is WTI oil, traders must remember that oil can be affected by weather. Currently there is a hurricane that is developing in the Caribbean Sea and is expected to reach the Gulf of Mexico by the end of the week. This is certainly part of the catalyst for higher oil.

The news out of the European Union is simply one of the most bizarre scenarios that we have ever seen in our life times. Traders cannot follow all of the news that comes out of that region regarding the European bank bailout. Therefore, traders should simply watch the U.S. Dollar Index(DXY). When the DXY rallies the major stock indexes will decline and deflate lower. The opposite is true when the DXY sells off or pulls back, the major stock indexes will inflate and trade higher. Traders should continue to expect these schizophrenic markets going forward. The only beacon of light that we have as a trader to navigate us through these turbulent markets is going to be to follow the U.S. Dollar Index.

Nicholas Santiago InTheMoneyStocks.com

Schizophrenic Market Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets. Article Source

Stocks fluctuated Monday as investors did a little buying after four days of heavy selling. The Dow Jones industrial average erased its early losses and was up 27 points. Other major stock indexes rose slightly. Interest rates dropped as investors looking for safe investments bought U.S. Treasury notes and bonds. The market initially pulled back after a regional manufacturing report fell short of forecasts and Japan became the latest country to show signs of slowing growth. Both reports raised investors’ concerns about the pace of the global economic recovery. Analysts said Monday’s trading was just a pause following four days of losses that sent the Dow down almost 400 points.

“The market is really being controlled by (short-term) traders,” said Mike Rubino, CEO at Rubino Financial Group in Troy, Mich. “The long-term investor doesn’t appear to be anywhere in sight.” Without those long-term investors, trading is expected to remain erratic for the foreseeable future. In midday trading, the Dow rose 26.72, or 0.3 percent, to 10,329.87. The Standard & Poor’s 500 index rose 3.05, or 0.3 percent, to 1,082.30, while the Nasdaq composite index rose 19.67, or 0.9 percent, to 2,193.15. About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 329.6 million shares. Investors continued buying Treasurys Monday, driving interest rates lower. U.S. government bonds are looking more and more appealing to investors wanting to find a safe place for their money as the economy cools and stocks drop. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.60 percent from 2.68 percent late Monday. Its yield is often used to help set interest rates on mortgages and consumer loans. The yield on the 10-year note is near the level it last hit in March 2009 when stocks fell to a 12-year low. “It’s a sign of pessimism that investors accept that low a yield,” said Joe Heider, principal at Rehmann Financial in Cleveland. Investors who are concerned about the U.S. economy got some bad news from overseas Monday. Japan said its economy grew just 0.1 percent in the second quarter, well below the 1.2 percent growth in the first quarter and short of expectations. The report follows signs last week that both the U.S. and Chinese economies are not growing as fast as earlier in the year. Meanwhile, the Federal Reserve Bank of New York said manufacturing activity in the state rebounded slightly this month after falling sharply in July. Despite the modest gain, activity did not expand as much as had been forecast, which indicates that economic growth remains tepid.

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Stocks fluctuated Friday after a mixed batch of readings on consumer spending contributed to a muddled picture of the economy. The major stock indexes moved in a narrow band, alternately rising and falling in very light trading. Many traders were away on vacation, and those who were working had little reason to make any major moves because of economic data that remains confusing.

The Commerce Department said that retail sales rose 0.4 percent in July. That was an improvement after two months of sales declines. But the number was just below economists’ forecast of a gain of 0.5 percent. The report did show strength in auto sales, but it also showed that consumers are shying away from other purchases. Some better news came from the University of Michigan/Reuters survey of consumer sentiment for the first part of August, which showed consumers are slightly more optimistic. An index based on the survey came in at 69.6, slightly above analysts’ estimates and up from July’s 67.8.

Earlier Friday, retailer J.C. Penney Co. lowered its earnings forecast for the year, citing expectations that consumer spending will be slow. J.C. Penney joined competitor Kohl’s Corp., which lowered its earnings outlook on Thursday.

These latest reports fell in line with a long string of conflicting data that has left investors unsure about where the economy is headed. Consumer spending has remained weak along with the labor market. And there are no signs that employers are ready to start hiring at a pace to help lift the economy. On Thursday, the Labor Department said the number of people filing for unemployment benefits for the first time rose last week. Although J.C. Penney and Kohl’s had disappointments for investors, second-quarter earnings overall have been strong and company executives are optimistic. The split between economic and earnings numbers has added to investors’ murky view of the economy.

That uncertainty has led to heavy selling this week. The Dow Jones industrial average has lost 380 points over the past three days. But the big drop may also have lured some buyers back into the market Friday. “Maybe it’s getting ready to be bought again,” Philip S. Dow, director of equity strategy at RBC Wealth Management in Minneapolis, said of the market. He noted that the market‘s recent declines have made stocks more attractive. Still, that doesn’t mean analysts are looking for the market to rally. “We’re in a fragile market,” said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. He noted that the market‘s decline is feeding the lack of confidence among consumers and investors. That inevitably has an impact on the economy.

The Dow Jones industrial average was up 22.29, or 0.2 percent, at 10,342.32. The Standard & Poor’s 500 index rose 0.43, or 0.04 percent, to 1,084.04. The Nasdaq composite index fell 4.28, or 0.2 percent, to 2,185.99. Rising stocks were ahead of losers by 4 to 3 on the New York Stock Exchange, where volume came to a light 445 million shares.

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Wall Street remains in panic mode this morning.  Stock Index futures were lower pre-open and this logically carried over into the first hour where the Dow opened down more than 100 points before finding bids. The  Volatility gage (VIX Index) is at its highest level since the market plummeted in 2008, and traders expect Friday action to whip-saw all stocks.

Futures pointed to further selling Friday after major stock indexes posted their biggest drops in more than a year and pushed the market to “correction” mode.

Investors again looked to Europe for direction. The German parliament approved the country’s share of a $1 trillion plan to help contain debt problems in the European Union but major stock indexes fell more than 1 percent in Europe. Traders are worried stronger countries like Germany and France will be saddled with heavy debts to help weaker EU countries.

The euro rose to $1.2541 from $1.2464. The 16-nation currency has been a big driver of trading for weeks but many traders have been skeptical that any advances will be short-lived.

World markets have been falling on concerns that European debt problems will upend a global rebound. The fear is that huge deficits in countries including Greece and Portugal will cause a wave of bad debt to race through the world’s financial system. Even if that is prevented, the prospect of heavier borrowing and sluggish growth has traders concerned.

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