Dollar Days

Stocks closed higher today as investors have come to live with uncertainty regarding trade-war headlines. The U.S. Dollar weakened slightly to settle in at the low end of its price trend over the last year.

Chart Advisor | Focus on the Price By Gordon Scott, CMT Monday, October 21, 2019 1. Stocks Lift Higher even as Dollar Provides Drag 2. Retail Surge Driven by Those with Dollars 3. Target Nearly Doubled in 2019 Market Moves Stocks closed higher today as investors have come to live with the uncertainty associated with trade-war headlines. The U.S. dollar weakened slightly to settle in at the low end of its price trend over the last year. The chart below suggests that what the dollar is doing may have an effect on the price action for stocks. During the year 2017 when the dollar showed a steep downward trend, stocks showed a clear upward trend. Beginning in 2018, the dollar reversed trend and settled in to a slow and steady upward trend. Ever since then the market's volatility has been much more pronounced. If the dollar breaks through the bottom of its upward trendline and heads lower, this could be a strongly bullish sign for stocks.      Retail Surge Driven by Those with Dollars State Street Global Advisors' sector ETF for stocks that sell consumer staples (think toothpaste, toilet paper, fast food, cheap clothes) tracks a collection of consumer staples. This fund,  Consumer Staples Select Sector SPDR Fund (XLP), may provide a good benchmark to look at companies that sell things you can buy with a dollar. With the U.S. economy running at such low unemployment, a strong dollar buys more important goods than in days past. If consumers are able to stretch their dollar further, then the retail sector may see the benefit of consumers who feel a little more flush.    The evidence seems to play out in a few stocks shown in the chart below. Companies such as Dollar General, (DG) Walmart (WMT), Dollar Tree (DLTR), Casey General Stores (CASY), Target (TGT) and Amazon (AMZN) have all done well this year. While these stocks have all done well this year, Amazon surprisingly has lagged this group. There are a myriad of factors in Amazon's multi-faceted business that could account for this dynamic, but is it possible that Amazon's global customer set (compared to a more domestic customer set for the other companies) could be pinched by a rising U.S. dollar?     Read more: The Next 20 Years, According to Ray Dalio How Stealth ETFs Plan to Invade a $7.2 Trillion Market  Why the Coming Super Cycle Will Lift Video Game Stocks' Target Nearly Doubled in 2019 Like other stocks in the consumer staples sector, Target Corporation (TGT) has done well. Unlike most of the other stocks in that sector, however, it has surprised investors with higher revenues, higher profits and strong forward guidance. The company reaches a wider swath of those up and down the various economic strata in the U.S. and likely benefits disproportionately from full employment and a strengthening U.S. dollar.       The Bottom Line Stocks pressed higher today to close near former high levels. The U.S. dollar dropped and closed in a position that suggests in may drop lower, which would be an apparent good move for stocks. Retail stores have been showing stronger profits from the strengthened buying power of U.S. consumers. Target seems to have benefited the most.  How can we improve the Chart Advisor? Tell us at chartadvisor@investopedia.com Enjoy the Chart Advisor?  Copy and share the link below to invite friends to sign up https://link.investopedia.com/join/53o/00-fwd-chartadvisor CONNECT WITH INVESTOPEDIA Email sent to:  mondemand.forex@blogger.com If you wish to update your newsletter preferences or unsubscribe, please click here   114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC. All Rights Reserved | Privacy Policy