Watching the Greenback

Byron Wein was on CNBC this week saying investors were euphoric and a market correction was right around the corner. “Euphoria” and “correction” are strong words, but the case for a near-term pullback isn't a bad one at all. For now, the 50-day simple moving averages for the Dow, S&P 500 and Nasdaq Composite are the line in the sand.As of Thursday's close, a pullback of nearly 4% of would take the Dow and S&P 500 down to their 50-day lines at 13,410 and 1,454 respectively. A 3% pullback for the Nasdaq would take it down to its 50-day line. It would take some fairly dire market headlines for indices to break below this key support level with conviction -- not a likely occurrence at this point, at least in the near-term.Plenty of market pros have been making the case about why a market pullback is imminent. In recent days, volatility has increased as evidenced by wide-and-loose, erratic intraday price swings in the major averages. After a big run for a stock or an index, price action like this can often mark a top. There's also been talk about lukewarm corporate earnings and sluggish economic growth in the U.S. and Europe. Oh, and don't forget about recent data from Hulbert Financial Digest that show newsletter writers are recommending record exposure to stocks. Bears love this data because it's contrarian.Market bears are also licking their chops over recent strength in the U.S. Dollar. The U.S. Dollar Index jumped 0.6% Thursday to 80.19. Its 50-day moving average had been resistance since Jan. 18 but not anymore. The greenback stopped just short of breaking out over a descending trend line Thursday. A new potential resistance level is its 200-day moving average at 80.87. If money continues to rotate out of the Euro and into the dollar, it could weigh on the market in the near-term. Continued strength in the dollar, however, is far from a sure thing. The CurrencyShares Euro Trust (NYSE: FXE) continues to hold above its 50-day moving average at $131.29. It closed Thursday at $132.92, down 0.9%. On Thursday, the European Central Bank (ECB) left rates at a record low of 0.75%, but ECB President Mario Draghi acknowledged that continued strength in the euro could harm an economic recovery. The comments mean that further rate cuts in the region aren't out of the question.