Today's speech from President Bush regarding stiffer penalties for corporate executives that mislead investors with "fuzzy accounting" found stocks back to their best levels of the session, but once the speech ended, stocks drifted marginally lower.
As time passes, we have seen a rebound in the US Dollar on an intra-day basis and traders may look for this action to have shorter-term traders in the Gold/Silver Index (XAU.X) 76.19 +5% taking some short-term gains off the table after yesterday's 3.8% recovery and some follow through today.
US Dollar Index (dx00y) - Daily Chart Interval
The US Dollar Index (dx00y) came very close to breaking below the lower end of our retracement that we rolled lower a couple of weeks ago to mark a relative low dating back to June 7, 2000, where the U.S. Dollar staged a major rebound. Without a break of this level (105.56), I'm looking form some short-term traders in gold stocks to be taking some gains off the table as they haven't seen a further break in the U.S. Dollar.
Still, the "lack of confidence" that appears to be prevalent in the current market environment sure looks to be showing up in today's new relative low in the U.S. Dollar.
The weaker U.S. Dollar however may not necessarily be all that bad for every stock in the market. As mentioned in the past, some of the larger U.S-based multinationals have complained that the once strong dollar was putting a crimp in corporate earnings as the strong dollar had their products experiencing price dissadvantage when exporting overseas.
Shares of Dow component and deep cyclical 3M Company (NYSE:MMM) $129.38 +0.17% came ever so close to achieving a new 52-week high (130.60) today with a trade at $130.09 in the early going. Bulls need a break to new highs to get some bears turning to cover.
3M Company Chart - Daily Interval
The weakening U.S. Dollar looks to have been a friend to 3M as the stock challenges a 52-week high. The only think I see holding the stock back from a sprint to the $140 level is the "lack of market confidence" from investors.
While we may think a rebound in the U.S. Dollar would then weigh on 3M (MMM), the recent steep declines in the U.S. $ most likely has given the company's offerings some breathing room for much better pricing competition overseas, that should carry over for the next couple of quarter. What 3M bulls most likely would benefit from is a rebounding U.S. $, which would likely be a sign of some renewed optimism among investors that accounting concerns are being dealt with and will be less likely to weigh on the MARKET's psychology.
While I'm not looking to trade 3M at current levels, it could be a good stock to keep an eye on to see if the MARKET does gain some confidence and push the stock higher. If so, then that may spill over to other stocks with a "multi-national" flavor.