The stock market traded in a wide range on Thursday. After trading higher in the morning, all the stock indexes did an intraday reversal to the downside with the DJIA closing down nearly 200 points and the S&P 500 losing 20 points.
The Nasdaq was down nearly 50 points and the Russell 2000 was down nearly 18 points.
The market reversal related to clients taking money from Deutsche Bank and brought back memories of what occurred at Lehman Brothers 8 years ago. Once the run starts, it is difficult to stop. Who knows what amount of derivatives are underneath Deutsche Bank that could threaten the global banking system. The recent Wells Fargo scandal involving more than two million fraudulent accounts created by bank employees is also in the public's thoughts.
A number of major banks have done well in recent years, but the industry's reputation is a fraction of what it was prior to the Great Recession.
With one trading day left in September, the Dow Jones Industrial Average is down 256 points for the month, the S&P 500 has lost 14.5 points for the month, the Nasdaq is higher by 67 points for the month and the Russell 2000 is slightly in the red.
Thus, the machines may make a run to the upside on Friday to close the month of September in the green. The third quarter also ends on Friday and all the stock indexes appear to be closing the quarter on the upside. This will be the fourth consecutive quarter that the DJIA and S&P 500 will close to the upside. The last time that has happened was the quarter ended Dec. 31, 2013.
An important point to mention, and one that has not received much attention from the financial media, is that at 4 p.m. on Friday, Sept. 29, the Chinese Renminbi will be added to the IMF Special Drawing Rights (SDR) basket. SDR currencies make up a supplementary foreign exchange reserve administered by the International Monetary fund.
This is the first time since the IMF created the SDR basket that a new currency will be added. The U.S. dollar, the euro, the Japanese yen, and the British sterling are the others. The move underscores that the yuan will be a major player in the global economy.
Perhaps this is foreshadowing the end of the U.S. dollar's reign as the major global currency.
Attached is a weekly chart of the U.S. Dollar Index (DXYO). The dollar appears to have topped out the week ended March 13, 2015 and has slowly been making lower highs on a weekly basis. Investors should watch this developing pattern as a weaker U.S. dollar will lead to a weaker U.S. stock market.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.