US MARKETS-- THE DOLLAR
Overbought Dollar Retreats
US Dollar: UUP fell 0.1% this week, following last week's 0.6% gain. It is currently very bullish—up 2.4% for the quarter (13 weeks), but up 7.3% in the last year (52 weeks). At 30, UUP is below its short-term (50-day) average at 30, and above its intermediate-term (200-day) average at 29. Momentum in the greenback is positive and neutral, but RSI14 @64 is neither overbought nor oversold. A Dollar weakened this week, dampening US assets over foreign assets, commodities, and gold. Longer term, the bullish Dollar favors US investments over foreign assets and commodities, while reducing US trade competitiveness.
The US Dollar enters 2025 very bullish. It opened trading in 2025 by going overbought on the first day and revisited overbought levels this past Monday (1/13) settling 0.1% lower in week three as bond yields dropped. Increasingly, the Fed’s December rate cut (with inflation pushing 3% and both payrolls and consumer confidence improving) is being perceived as ill-advised and potentially inflationary. The likelihood of another rate cut has subsequently dropped to 1% in January and 26% in March, leaving the Fed down to two cuts in 2025 rather than four. No rate cuts and rising bond yields are great for the Dollar. As for other major currencies vs. the Dollar, the Euro is very bearish, and up 0.4% this week. The Yen is very bearish, and up 1.1%. The Pound is very bearish, and down 0.3%. The Canadian $ is very bearish, and down 0.3%. The Australian $ is very bearish, and up 0.9%.
Non-Dollar investors seeking to maximize profits using the Moose should incorporate a "carry-trade" currency strategy into the decision, making it a two-step process. First, decide if it makes sense to switch to US Dollars, then use the Moose to identify the best ETF in which to put those Dollars. (Generally, if one's currency is weakening (bearish) against the Dollar, non-Dollar investors in the Moose will outperform. If a currency is bullish vs. the Dollar, the Dollar investment will underperform. If the Dollar is weakening, Dollar investors in the Moose might consider currency-hedged foreign equity ETFs instead of the Dollar denominated funds we track. A strengthening Dollar, however, suggests they be avoided.
US MARKETS-- 25Y LONG TreasurY BONDS
#8 Oversold Bonds Bounce Off 13-month Low
US Long Treasury Bonds: EDV rose 2.5% this week, following last week's 3.1% loss, leaving it ranked #8 globally and less attractive than cash. Long bonds are down 10.1% for the quarter (13 weeks) and down 10.8% for the year (52 weeks) as yields have risen. The US Treasury 10-year yield finished the week 17 ticks lower at 4.61% and the 3-month yield was lower at 4.19%, leaving the yield curve positively sloped by 42 basis points. That reduces the odds of a recession in late 2025. Technically, US long bonds are very bearish and at 67, EDV is below its short-term (50-day) average at 70, and below its intermediate-term (200-day) average at 74. Momentum (PMO) is negative and neutral, and its 14-day RSI of 42 means EDV is neither overbought nor oversold. As for currency effects, the Dollar weakened this week, dampening return for dollar investors in US bonds. Longer term, the bullish Dollar spurs investment in US assets, while reducing US trade competitiveness.
Bonds sank to a new 13-month oversold low last week after the latest jobs report suggested the Fed’s rate cut last month (with inflation pushing 3% and both payrolls and consumer confidence improving), was ill-advised and potentially inflationary. This week’s report put inflation closer to 3% than the Fed’s 2% target but bonds bounced off their oversold levels. Meanwhile, oil and commodities prices gained again this week adding to the inflation fears. Falling bond prices and rising commodity prices have put the Fed Check in rate HIKE mode since (1/10/25). The likelihood of another Fed rate cut in January has subsequently dropped to 1% and to 24% in March, leaving the Fed down to two cuts in 2025 rather than four. Next week is inauguration week, and up to 150 executive orders could be forthcoming on January 20, im
US Long Treasury Bonds: longer view— 2022: Bonds continued lower (and yields higher) after the Fed has promised to tighten. 2021: Yields kept rising and bond prices falling into March (EDV @125) due to the vaccine rollout; improving economic data; stimulus checks, and supply constraints due to an end to lockdowns. Then, the Delta variant initiated a second Covid wave and bonds rallied. Massive tax hikes proposed by the Biden administration added gasoline to the fire until passage failed in November (EDV @145).
2024 ETF Breakdown: EDV-- A market value-weighted index of high-duration, zero-coupon 25-year US Treasury securities. Countries: US (100%). Top Sectors: Government (93%), Cash (4%), ETFs (2%), Energy minerals (1%).
US MARKETS-- large-cap equities
#2 SPY Recovers From Stop-Loss
US Large-Cap Stocks: SPY rose 2.9% this week, following last week's 1.9% loss, leaving it ranked #2 globally and more attractive than cash. The index is up 2.2% for the quarter (13 weeks), but up 23.9% for the year (52 weeks). Technically, US large caps are slightly bullish and at 598, SPY is above its short-term (50-day) average at 596, and above its intermediate-term (200-day) average at 561. Its momentum (PMO) is negative and deteriorating, and its 14-day RSI of 56 means SPY is neither overbought nor oversold. As for currency effects, the Dollar weakened this week, dampening return for dollar investors in US stocks. Longer term, the bullish Dollar spurs investment in US assets, while reducing US trade competitiveness.
US large cap stocks backed off their 50-day and triggered a 20-day low stop-loss last week a double sell signal in our models. This week the sell signals were reversed almost immediately. (As noted at the time, head-fakes are quite common lately with SPY being essentially the only game in town.) By the close Friday SPY had posted three consecutive up days (MTW), retaken its 20-day median (W), and broken above short-term resistance at the 50-day (F). So if you took my advice and held SPY, stay put. If you took the model’s advice, exited SPY, and want to re-enter, you should get a better price when SPY’s 1/15 gap (585-589) fills. Falling bond yields propelled stocks recovery. With the likelihood of a Fed rate cut in January down to 1% and bond prices near an oversold 13-month low, investors think long-term yields may be poised to come down. Problem is that yields continue to be juiced by $2T in annual Federal deficit spending until mid-March. If Uncle Sugar continues to drive the US stock market higher as he has since 2017, it will remain the best place to put your money-- especially after deregulation. If, however, the bond vigilantes object to the looming fiscal reckoning from massive deficits and higher interest rates, it may not be a straight shot up.
US Large Cap Stocks: longer view— 2022: SPY remained weak on Fed uncertainty and after rate hikes began in earnest mid-year closed the year down 18%. 2021: SPY continued to rally on Trump and Biden fiscal stimulus; the vaccine rollout; an end to state lockdowns; and the Fed’s repeated insistence that inflation wouldn’t require rate hikes until 2023. That tune changed in December and stocks weakened.
2023 ETF Breakdown: SPY-- A cap-weighted index fund. Countries: US (100%). Top Sectors: Technology Services (20%), Electronic Technology (18%), Finance (12%), Health Technology (10%), Retail trade (7%), Consumer non-durables (5%), Energy Minerals (4%), Producer manufacturing (4%), Industrial Services (4%), Consumer services (3%), Commercial services (3%).
US MARKETS-- SMALL-cap equities
#3 IWM Holds 200-day Support
US Small-Cap Stocks: IWM rose 4.0% this week, following last week's 3.4% loss, leaving it ranked #3 globally and more attractive than cash. The index is down 0.1% for the quarter (13 weeks), and up 17.2% for the year (52 weeks). Technically, US small caps are slightly bearish and at 225, IWM is below its short-term (50-day) average at 229, and above its intermediate-term (200-day) average at 216. Its momentum (PMO) is negative and neutral, and its 14-day RSI of 51 means IWM is neither overbought nor oversold. As for currency effects, the Dollar weakened this week, dampening return for dollar investors in US assets. Longer term, the bullish Dollar spurs investment in US assets, while reducing US trade competitiveness.
US small cap stocks after ditching their 50-day three weeks back, put in 5 consecutive up-sessions this week, helped by falling bond yields. Small companies live for lower interest rates, but the likelihood of a January rate cut has dropped to 1% and a March cut to 24%, With the Fed down to two cuts in 2025 rather than four small cap optimism has been waning. Worse yet: falling bond prices and rising commodity prices have put the Fed Check in rate hike mode this month (1/10/25). US stocks continue to benefit from $2T in annual Federal deficit spending until mid-March. If Uncle Sugar continues to drive the US stock market higher as he has since 2017, the US will remain the best place to put your money-- especially after deregulation. If, however, the bond vigilantes object to the looming fiscal reckoning from massive deficits and higher interest rates, it may not be a straight shot up.
US Small Cap Stocks: longer view-- 2022: IWM remained weak on Fed uncertainty and after rate hikes began in earnest mid-year closed the year down 18%. 2021: IWM began higher on Fed ease and fiscal stimulus, peaking in June. It flattened out on Covid mandates and the threat of higher taxes and then dipped in December when Fed tightening fears arose.
2023 ETF Breakdown: IWM-- A cap-weighted index fund. Countries: US (99%). Top Sectors: Finance (22%), Health Technology (12%), Technology Services (12%), Producer manufacturing (8%), Electronic Technology (7%), Industrial Services (4%), Energy Minerals (4%), Commercial services (4%), Consumer services (3%), Process industries (3%).
INTERNATIONAL-- GOLD
#1 GLD Triggers Buy-Stop As Dollar Blinks
Gold Bullion: GLD’s price rose 0.4% this week, following last week's 1.9% gain, leaving it ranked 1 globally and more attractive than cash. Most recently GLD is down 0.8% for the quarter (13 weeks), but up 32.6% for the year (52 weeks). Technically, Gold bullion (GLD) is currently very bullish and at 249 above its short-term (50-day) average at 244, and above its intermediate-term (200-day) average at 233. Its momentum (PMO) is positive and improving, and its 14-day RSI of 59 means GLD is neither overbought nor oversold. As for currency effects, the US Dollar weakened this week, improving return for dollar investors in gold bullion. Longer term, a bullish Dollar dampens return to Dollar investors in gold.
Gold rose on stronger commodity prices, a slightly weaker Dollar, and lower bond and cash yields this week. Late week news of a Hamas-Israel ceasefire may have limited the gain on Friday after GLD triggered buy-stops Wednesday and Thursday. Gold has faced headwinds from Trump’s “no wars on my watch” and “Bitcoin President” promises.) December’s Fed rate cut, moreover, initially jacked bond yields and the Dollar higher, limiting gold’s usefulness as an inflation hedge. Last week however, gold surged after the December jobs report suggested the Fed’s rate cut last month (with inflation pushing 3% and both payrolls and consumer confidence improving), was ill-advised and potentially inflationary. A January Fed rate cut is unlikely (1%), but current spending patterns are swelling the Federal deficit by $2T a year potentially adding to inflation pressures. That said, given firm central bank demand for gold, another round of Chinese stimulus coming, and the possibility that premature Fed easing to date leads to inflation-- gold shouldn’t be counted out in 2025.
Gold Bullion: longer view— 2022: GLD opened @169 but faded as Fed promises to tighten turned real, closing the year @168. 2021: A stagflationary fiscal policy as the US economy reopened and rising interest rates as the Fed began promising it would tighten in the face of growing inflation weakened GLD 6% by yearend.
INTERNATIONAL-- COMMODITIES
Commodities Continue to New Multi-year Highs
Commodities: A bullish CRB rose 1.7% this week after last week’s 3.1% gain. That left commodity prices up 11.3% for the quarter (13 weeks), and up 17.2% for the year (52 weeks). At 311, the CRB is above its short-term (50-day) average at 293, and above its intermediate-term (200-day) average at 287. Its momentum (PMO) is positive and improving, and its 14-day RSI of 72 means the CRB is neither overbought nor oversold.
Crude Oil: Meanwhile, oil prices (USO) rose 2.3% this week, following last week's 3.5% gain, and are currently bullish. That leaves US oil prices up 15.6% for the quarter (13 weeks), and up 19.9% for the year (52 weeks). At 83, USO is above its short-term (50-day) average at 75, and above its intermediate-term (200-day) average at 75. The Dollar weakened this week, enhancing return for investors in hard assets. Longer term, the bullish Dollar is dampening return for investors in commodities and oil.
A last-minute executive order by the Biden administration attempting to end all US offshore drilling pushed oil prices higher and the CRB to a multi-year record last week. Unfortunately, oil and commodities prices gained this week adding to the inflation fears. Falling bond prices and rising commodity prices have put the Fed Check in rate hike mode this week (1/10/25). It is expected that Trump’s “drill, baby, drill” promise will return next week, when 150 executive orders are issued. Tighter global monetary policy in 2024 no doubt helped curb oil prices by reducing demand, but excessively loose US policies now seem to be raising bond rates.
Commodities: longer view— 2022: The rally in the CRB continued until mid-year thanks to Fed easing and Covid re-openings. It peaked and reversed when Fed tightening began in June but still finished the year up 19%. 2021: A new US President immediately curtailed US energy production. That and more easy money in the US and abroad boosted commodities 39%. Oil prices rose 73% setting off inflation alarms.
INTERNATIONAL-- EUROPEAN STOCKS
#7 Europe Retakes 50-day, Eyes Buy-Stop
European Large-Cap Stocks:IEV rose 2.4% this week, following last week's 0.2% gain, leaving them ranked #7 globally and less attractive than cash. Most recently, Europe is down 6.2% for the quarter (13 weeks), and up 4.1% for the year (52 weeks). Technically, IEV is very bearish at 54—above its short-term (50-day) average at 53, and below its intermediate-term (200-day) average at 55. Its momentum (PMO) is negative and deteriorating, and its 14-day RSI of 58 means IEV is neither overbought nor oversold. As for currency effects, the Euro strengthened this week, enhancing return for dollar investors in European stocks. Longer term, a bearish Euro dampens return to Dollar investors but improves Europe's trade competitiveness.
Europe peaked in late September and bottomed in late December after a Death Cross on 12/9. The Christmas low led to a small “dead kitten” bounce in late December that has made it into January. This week IEV made a bid to recover its 50-day and did. The rising US bond yields and strong Dollar that have been a major drag on European equities since their peak relented this week. December US jobs surprised to the upside suggesting fewer US rate cuts. (Moreover, the ugly prospect of Donald Trump insisting that the EU engage in fair trade and share in the cost of its own defense next year is ever closer.) That said the hedged version (HEDJ) of European equities gives a smoother less bearish ride for Dollar investors. Global Interest Rates:Europe followed US rates higher last year and has been leading them lower since. The ECB cut rates (to 3.00%) on 12/12, but the Bank of England held its rate (4.75%) steady on 12/19 after the Fed cut rates 25 bps to 4.25% on 12/18. The Ukraine War:10,000 North Koreans have entered the war on Russia’s side but have taken heavy losses. The Biden administration has cleared Ukraine to launch US long range missiles into Russia. Europe views Ukraine as a bulwark against Putin but worries that Trump will abandon it.
European Large Cap Stocks: longer view— 2022: IEV topped out @54 to open the year, dropped 31% (@ 37) by October on US rates hikes and a strong dollar, then rallied 32% into yearend as US rate hikes slowed and the Dollar weakened. 2021: More central bank largesse and four stimulus bills pushed IEV to new record highs @55-56 in May, but Fed talk of tightening stalled out IEV’s subsequent attempts to break higher, and it closed the year @52.
2023 ETF Breakdown: IEV-- A cap-weighted index fund. Countries: UK (24%), France (18%), Switzerland (16%), Germany (13%), Netherlands (7%), Denmark (5%), Sweden (4%), Spain (4%), Italy (4%), Belgium (1%). Top Sectors: Finance (18%), Health Technology (16%), Consumer non-durables (15%), Electronic Technology (7%), Producer manufacturing (7%), Energy Minerals (6%), Utilities (4%), Consumer durables (4%), Technology Services (5%), Process industries (3%).
INTERNATIONAL-- JAPANESE STOCKS
#6 EWJ Edges Up On Weaker Dollar
Japanese Stocks: EWJ rose 1.4% this week, following last week's 3.0% loss, leaving it ranked #6 globally and less attractive than cash. Most recently, Japan is down 5.6% for the quarter (13 weeks), and up 0.4% for the year (52 weeks). Technically, EWJ is very bearish at 66, below its short-term (50-day) average at 68, but below its intermediate-term (200-day) average at 69. Its momentum (PMO) is negative and neutral, and its 14-day RSI of 46 means EWJ is neither overbought nor oversold. As for currency effects, the Yen weakened this week, dampening return for dollar investors in Japanese stocks. Longer term, a bearish Yen dampens return to Dollar investors but improves Japan's trade competitiveness.
EWJ has been following its intermediate trend higher for about two months, waiting and watching since the election. The Trump victory may promise a strong American consumer for Japan’s export economy, but it also includes the threat of US tariffs blowing up Japan’s traditional weak Yen beggar-thy-neighbor trade policies. This week the US inflation report moderated the Dollar and weakened the yen which in turned helped EWJ’s effort to reclaim both short and intermediate trends. 2024 was a bumpy road for Bank of Japan since putting further rate hikes on hold, EWJ has been flat. The hedged version (DXJ) of Japanese equities gives a smoother more positive ride.
Japanese Stocks: longer view -- 2022: Japan fell 29% on tighter US money and a strong Dollar into October. From there a weakening Dollar helped Japan rally 20% but it ended the year down 19% anyway. 2021:EWJ went flat, despite hosting the summer Olympics, finishing the year practically unchanged.
ETF Breakdown: EWJ-- A cap-weighted index fund. Countries: Japan (100%) Top Sectors:Finance (15%), Consumer durables (14%), Producer manufacturing (14%), Electronic Technology (12%), Health Technology (9%), Process industries (5%), Technology Services (5%), Consumer non-durables (5%), Communications (5%), Distribution services (4%).
INTERNATIONAL-- ASIA-PACIFIC EX-JAPAN STOCKS
#5 AAXJ Closes Week at 200-day Resistance
Asia-Pacific ex-Japan: AAXJ rose 2.4% this week, following last week's 3.5% loss, leaving it ranked #5 globally and less attractive than cash. The index is down 8.5% for the quarter (13 weeks), and up 13.9% for the year (52 weeks). Technically, AAXJ is slightly bearish and at 72, below its short-term (50-day) average at 73, and below its intermediate-term (200-day) average at 73. Its momentum (PMO) is negative but improving, and its 14-day RSI of 47 means AAXJ is neither overbought nor oversold. As for currency effects, the US Dollar weakened this week, improving return for dollar investors in Asian stocks. Longer term, a bullish Dollar dampens return to Dollar investors in Asian stocks but improves the region's trade competitiveness.
China’s politburo promised another dose of economic stimulus (12/9) in 2025. Nevertheless, AAXJ has been in fifteen-week slide since hitting a three-year overbought high (10/7) in the wake of September’s massive Chinese monetary stimulus. It lost 50% of the autumn rally as it became increasingly clear that monetary stimulus alone wasn’t enough to overcome weak demand, deflationary pressures, a crashed real estate sector, and rising trade tensions with the United States and Europe. Couple that with the realization that US subsidies to China and India under Biden will end under Trump when the US again exits the Paris Climate Accords, and things could get worse for Asia-Pacific despite the new plans. Singapore, China, Taiwan, Hong Kong and India are bullish intermediate term while South Korea is bearish.
ETF Breakdown: AAXJ-- A cap-weighted index fund. Countries: Hong Kong (36%), Taiwan (17%), India (16%), Korea (14%), Mainland China (4%), Singapore (4%), Thailand (2%), Indonesia (2%), Malaysia (2%), US (1%). Top Sectors: Finance (24%), Electronic Technology (20%), Technology Services (10%), Retail (7%), Consumer non-durables (5%), Consumer durables (4%), Producer manufacturing (4%), Transportation (4%), Energy (4%), Health Technology (3%).
INTERNATIONAL-- LATIN AMERICAN STOCKS
#9 ILF Rally Off 2024 Low Continues
Latin America 40: ILF rose 2.4% this week, following last week's 1.3% gain, leaving it ranked #9 globally and less attractive than cash. The index is down 14.4% for the quarter (13 weeks), and down 22.0% for the year (52 weeks). Technically, ILF is very bearish and at 22, ILF is below its short-term (50-day) average at 22, and below its intermediate-term (200-day) average at 25. Its momentum (PMO) is negative but improving, and its 14-day RSI of 50 means ILF is neither overbought nor oversold. As for currency effects, the Dollar weakened this week, enhancing return for dollar investors in Latin stocks. Longer term, the bullish Dollar dampens return to Dollar investors in Latin stocks but improves the region's trade competitiveness. It also makes repaying dollar-denominated debt tougher.
After rocketing to a 2024 overbought high (8/19) in two weeks, ILF lost it all and more posting a new oversold 20-month low (@20.83) to open 2025. It has since bounced but still faces short and intermediate resistance. Rising US bond yields and a stronger Dollar have been a drag on the Latin financial equities for four months. Weak mining and energy sectors have added to ILF’s misery— not to mention Trump’s new BRIC tariff threats. Global Economic Concerns: Commodities and oilhave overcome 50 and 200-day resistance, but China's massive monetary stimulus announced 9/26 has failed Latin America, and the new stimulus announced 12/9 has yet to resonate. Moreover, inflation is a problem, especially in Mexico, Argentina and Brazil. For now, Mexico (EWW), Colombia (GXG), Chile (ECH), and Brazil (EWZ) are mired in “stupid government” phases that have turned their equities bearish. Only Argentina’s (ARGT) equity ETF is above its 200-day.
Latin American Stocks: longer view— 2022: A weaker Dollar helped an oversold ILF rebound 38% by April, drop 32% by July, comeback 21% by August and go sideways (@23) from there, finishing the year up 10%. 2021: ILF rallied peaking (@32) in June on reopening but faded to a December bottom (@22) with the Delta variant and Omicron.
2023 ETF Breakdown: ILF-- A cap-weighted index fund. Countries: Brazil (58%), Mexico (26%), US (8%), Chile (6%), Colombia (2%) Top Sectors: Finance (31%), Non-energy minerals (20%), Energy Minerals (14%), Consumer non-durables (10%), Retail (7%), Communications (5%), Technology Services (4%), Utilities (3%) , Process Industries (2%), Producer manufacturing (2%).