(By Rich Bieglmeier) Following Friday's dismal Employment Situation report of only 69,000 new jobs versus expectations of 150,000, the indexes all closed at short-term lows, confirming the downtrend remains intact.
The Dow wiped out all of its 2012 fast start; the S&P is 20 points away from being underwater, while the NASDAQ has another 90 to go before turning red.
Based on the NASDAQ's chart, iStock sees a triangle or upside-down "T" which suggests the index is on a path to 2650, possibly 2600. Watching volume increase as the equity index wilts indicates there are plenty of sellers left.
Friday's selloff pushed the NASDAQ below the trend line connecting the low price pivot points dating back to October. Following the trend line connecting the stop side peaks puts 2475 in play if the index blows below 2600.
[Related -Health Care SPDR (ETF)(NYSEARCA:XLV): The Only ETF You Need To Own – For September]
It's really hard to imagine the stock market pulling a U-turn right now and reaching for sunlight like Tulips after a rain storm. There are simply too many things work against equity prices right now, including a rising dollar.
As banking in Spain continues to implode, and an uncertain outcome for Greek elections in two weeks, the cycle of selling euros to buy dollars will continue. The "flight to safety" will impact up to 60% of S&P 500 member's earnings as they do the majority of their business in non-dollar currencies.
[Related -CONN'S, Inc. (CONN) Q2 Earnings Preview: The BIG Move Quarter]
While each company implements hedging strategies to help offset currency fluctuations, many bottom lines will shrink as the dollar expands. Pairing a slowing economy with a strong greenback could provide a one-two punch that knocks second earnings down for an eight count; smaller profits = smaller stock prices.
On this chart, it's easy to see, as the dollar rises, US stocks and the euro pull a Humpty Dumpty.