If dollar going up, many believe stocks will move down. If so, where best to short, eg large cap or small cap?
By Daniel at 12 December, 2009, 2:21 pm
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Elaborating/clarifying my earlier post on SPX versus Russell 2000 (RUT):
1) RUT has been mostly below its 50 day MA since around October 26. SPX has been above its 50 day MA since early November. So on that time frame, RUT looks weaker.
2) RUT has closed above its 50 day MA last 6 sessions, same as the dollar. My recollection is that a stronger dollar tends to favor small caps over large. If so, rising dollar may be one thing supporting RUT in last week or so. Would a continuing rising dollar continue to support RUT? Would it support RUT absolutely? Or just relative to SPX, with both falling in absolute terms as the dollar rises?
3) RUT 50 day MA is falling slightly. SPX 50 day MA is rising. So on that time frame, RUT looks weaker.
4) Dollar (USD) is approaching the midline of its weekly Bollinger band, which might push it back down a bit (though not necessarily). If dollar does drop (for a week or two), that might increase relative strength of large caps (SPX) over small (RUT), (for that week or two).
5) The January effect favors …
6) Comparing mid-November highs to current near-highs, RUT daily RSI is about the same now as then. SPX daily RSI is lower now than it was then. In this sense, RUT looks stronger than SPX.
- Now-n-Then
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