Key News

• Export reliance 'not sustainable' for Germany (Financial Times)
• Japan predicts record fall in output (Financial Times)
• IMF says national deficits to remain sky-high (Financial Times)

Key Reports (WSJ):
7:45 a.m. ICSC Chain Store Sales Index For Apr 24: Previous: -0.4%.
8:55 a.m. Redbook Retail Sales Index For Apr 24: Previous: +1.5%.
9:00 a.m. Feb S&P/Case-Shiller Home Price Index: Previous: -19%.
10:00 a.m. Apr Conference Board Consumer Confidence: Previous: 26.
10:00 a.m. Apr Richmond Fed Manufacturing Index Previous: -20.
4:30 p.m. API Oil Industry Report For Apr 24
5:00 p.m. ABC/Wash Post Consumer Conf For Apr 24: Previous: -47.

Quotable

"Dictators ride to and fro upon tigers which they dare not dismount. And the tigers are getting hungry."

                              Winston Churchill

FX Trading - As charts go, the buck looks better than stocks ...
This is one of those times when we'd like a straight answer; we're likely not going to get one, though ...

The opening act of the US bank stress tests has unfolded with attention paid only to Citigroup and Bank of America so far. We were not told these banks necessarily failed the stress test (we wouldn't want to unfairly scrutinize banks based on their merits.)

We weren't told these or any other banks passed the stress tests, either. Heaven forbid we end up with another New Haven, Connecticut firemen mess on our hands.

The lack of transparency (a popular word nowadays) is creating concern. Unless officially announced results and official rhetoric sound an overly positive tone at some point, it appears the absence of clarity on this matter will weigh on risk-appetite.

(Swine flu hasn't been good for the appetite either.)

Last week we became a bit confused by the resilience of risk-takers; specifically price action in the US dollar was rather disappointing. The buck was oblivious to normally supportive developments.

But now flu is bringing out the worry. Stocks remain the risk-appetite gauge; and they could be rolling over.

A couple things worth noting:

1. Prices appear to be rolling over. Circled in blue, the upward trend in S&P 500 futures has slowed, failing to make a new high last week.
2. A cluster of price points, as noted with the parallel lines, has proven a sticky resistance level.
3. The relative strength index (RSI), circled in red, appears to have topped out. A plateau since mid-March is now turning down.

The US dollar index, on the other hand, remains within a very steady near-term uptrend move. In the chart below, the buck has bounced from a test of the lower bound of an upward-sloping trend channel. RSI, also rising steadily, has tested a similar support level and is in the process of bouncing back.

Looking more closely at the trend channel beginning in mid-March, the number of days constituting an upward move outnumbers those making up a downward move. (Note: corrective moves are usually shorter in duration relative to impulse moves (those moves occurring in the direction of the dominant trend.)

Right now the game remains one of risk-appetite, ebbing and flowing. Swine flu is leaving the risk-takers uncomfortable; perhaps they're rethinking the merit of the latest stock market, risk-taking rally. Perhaps.