Here’s a quick look at the S&P 500 and U.S. dollar, with short-term technical levels to watch for the rest of the week.

The June S&P 500 index closed higher due to short covering on Wednesday, May 28, 2008, as it consolidated some of last week’s decline. Technical momentum indicators, stochastics and the Relative Strength Index (RSI), are oversold but are turning neutral, hinting that a short-term low might be in, or is near. If June extends last week’s decline, I see first support at 1376, and then the reactionary low at 1326, which is the next downside target. Closes above the 20-day moving average at 1403 could signal that a short- term low has been posted.

For day traders, I see the market force as bullish to cautious. Today could be pivotal. If we see prices hold under 1387, the market could start turning weaker again. I do see the potential for a move up to 1403 before prices start to falter, however.

The June Dollar Index futures closed higher on Wednesday and above the 10-day moving average at 72.55, signaling that a short- term low appears to have been posted. Stochastics and the RSI are oversold and are neutral to bullish, hinting that a short-term top might be in or is near. In my opinion, closes above the 20-day moving average at 73 are needed to confirm that a short-term low has been posted. If June futures extend last week’s decline, April’s low at 71.05 is the next downside target. I see first resistance at 72.81, and second resistance at the 20-day moving average at 73. First support is at 71.90, and second support is at 71.05.    

On the fundamental side, economic data was mixed, but seems mildly supportive to the dollar in early trade. The Commerce Department revised its first-quarter reading on gross domestic product upward, to a seasonally adjusted 0.9 percent annual rate, from 0.6 percent reported previously. The Labor Department reported initial claims for unemployment insurance climbed 4,000 to 372,000 in the week ended May 24. 

While U.S. durable-goods orders fell 0.5 percent in April, analysts and economists were forecasting a much larger-drop, so the report was not as bad as feared.

In a speech Wednesday, Federal Reserve Bank of Dallas President Richard Fisher suggested the central bank will raise interest rates should inflation heat up. “I don't know a single person on the committee that isn't concerned about inflation,” he said. 

Feel free to call me to discuss trading strategies for these or other markets. Good luck and good trading!

Jeff Friedman is a Senior Market Strategist with Lind Plus. He can be reached at 866-231-7811 or via email at jfriedman@lind-waldock.com. Join Jeff for his monthly webinar, Friedman’s Futures Forecast, by visiting Lind-Waldock’s events page.

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