The Dollar Continues to Get Pounded

The DXY continues to tunnel deep inside 200 DMA territory, with equity momo day traders and overcaffeinated hi fi program traders taking a cue from the 2005 playbook and buying up equities, making even more impromptu follow on offerings not a question of if, but when. Then again, nobody said bizarro market is over, and in this upside-down world dilution is a good thing. (click on chart to enlarge)

Comments

[doubleguns:]

Soon we will all be watching reruns of the 70's" show.

May 15 06:43 AM

[kelm:]

Jim Rogers said recently he expected a currency crisis as soon as this fall. My bet is the Fed will up the stakes in the QE strategy and that will start the sell-off in earnest.

May 15 09:50 AM

[dcb:]

this an interesting post, and a bit of a contradiction from you. the dollar has done very poorly because the nonsense rally has decreased the us dollar as a safe haven. It is a reflection of risk taking. and is a reflection of emerging market stocks. therefore, one should be looking to see the dollar gain as this rally fails. so, please explain your rationale so things fit together.

I'd be looking at uup, (dollar bull somewhere).

May 15 12:15 PM

[dcb:]

Sorry, to add to my prior post it would indicate disaster to have a falling dollar and markets. indicating massive dumping of dollars. please continue to follow. the only thing holding the dollar up is the percieved safe haven status. That would mean the worst fears of the bailout ave happened.

May 15 01:47 PM

[altaman:]

The only thing holding up the dollar, relatively speaking against even more tattered currencies anyway, is the Fed, Fannie, Freddy and the Treasury paying artificially high prices for dollar donominated paper. I do not see the dollar as any sort of a safe haven going forward nor do I think that the rise Treasuries rates suggests a higher investor tolerance for risk.

The highest risk bet out there is betting that the Treasury bubble will not pop. Somehow I think the trend for the dollar will continue to be down given all of the current and ever expanding demands on the government for bailouts with newly printed cash.

May 15 02:10 PM

[Just Say Whoa!:]

I'm going to get a picture of myself riding a wagon train.

That will show that I'm a "rugged individualist".

Rugged individualists pay for all of their transactions with little bags of gold nuggets.

Someone who wears buckskin and has flint loading firearms is certainly someone who is up on the latest Capitalistic news, you betcha!

May 15 02:35 PM

[Dr. O:]

Dollar lookin' a little toppy? You betcha. Falling dollar correlates with rising stocks and rising commodities. I'm playing the commodities and am short the SPY via SDS as a hedge.

May 15 07:12 PM

[dcb:]

I traded into DUG, and will buy EEV.
If pattern follows like last may, which look like it is happening as we speak, oil drop then emerging markets. since emerging markets dropped after oil dollar is still weak. I expect within nest week will see dollar strength and emerging weaken. emerging have been due to go down since. may 4th to be exact.

for a long term buy keep and eye on dbb. I think we are close to that point soon if markes go down way I expect in about a week? at about 13. it it drops down below this watch out for world markets because it means we are pricing in disaster again.

the macd for dbb does not look favorable at this time.



On May 15 07:12 PM Dr. O wrote:

> Dollar lookin' a little toppy? You betcha. Falling dollar correlates
> with rising stocks and rising commodities. I'm playing the commodities
> and am short the SPY via SDS as a hedge.

May 16 10:27 AM

[dcb:]

I have a theory and invite commentary from people. I follow currency, commodity, and credit to get clues of market direction. does anyone else, and does anyone have a good site to follow credit info?

Based upon my reading commodity stabilization always leads equity recovery. industrial metals went up and fell back by 1/2. which is where I get my idea of a 50% correction in equities?

May 16 10:31 AM

[dcb:]

interesting, because I am looking for fall (late summer to put in equity positions, unless things change)


On May 15 09:50 AM kelm wrote:

> Jim Rogers said recently he expected a currency crisis as soon as
> this fall. My bet is the Fed will up the stakes in the QE strategy
> and that will start the sell-off in earnest.

May 16 10:39 AM

[dcb:]

A good example of why it doesn't make fiscal sense to prop up the markets and why for each dollar spent we get less of a return on our investment.

Dollar Looms as ‘Weak Link’ for U.S. Stock Rally: Chart of Day
Share | Email | Print | A A A

By David Wilson

May 15 (Bloomberg) -- U.S. stocks are poised to lag behind European and Asian shares because the dollar is a “weak link,” according to Jason Todd, a strategist at Morgan Stanley.

As the CHART OF THE DAY shows, the Dollar Index slid in the past two months as the Standard & Poor’s 500 Index and the MSCI EAFE Index, a benchmark for non-U.S. markets, both surged. The currency gauge tracks the dollar’s value against the euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

The dollar’s inability to follow the lead of share prices and move higher in anticipation of an economic recovery is “a notable inconsistency,” Todd wrote in a report yesterday.

While the S&P 500 tends to rise when the dollar drops, it usually fails to keep pace with EAFE, the report said. The U.S. index trailed in five of six time periods between 1981 and 2007, according to his research. EAFE soared about five times as much in dollar terms during a seventh period, from 1985 to 1988.

Todd also suggested that the dollar’s slump may enable energy, technology and industrial companies dependent on the global economy to outperform financial and so-called consumer discretionary companies that rely on local markets. Financials may lose their place as U.S. market leaders, he added.

“These trends may not play out immediately,” he wrote. European companies are worse off fundamentally than their U.S. peers, and financials are benefiting from increased lending profits and a capital-market revival, he added.

(To save a copy of the chart, click here.)

To contact the reporter on this story: David Wilson in New York at [e-mail]
Last Updated: May 15, 2009 11:12 EDT

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May 16 01:15 PM

[nyse1982:]

Well in the equity and forex markets I use VSA strategy which was featured in SFO Magazine>www.sfomag.com/homefea...


On May 16 10:31 AM dcb wrote:

> I have a theory and invite commentary from people. I follow currency,
> commodity, and credit to get clues of market direction. does anyone
> else, and does anyone have a good site to follow credit info? <br/>
>
> Based upon my reading commodity stabilization always leads equity
> recovery. industrial metals went up and fell back by 1/2. which is
> where I get my idea of a 50% correction in equities?

May 16 04:08 PM

[nyse1982:]

what markets do you trade in? Also do you twitter?


On May 16 01:15 PM dcb wrote:

> A good example of why it doesn't make fiscal sense to prop up the
> markets and why for each dollar spent we get less of a return on
> our investment.
>
> Dollar Looms as ‘Weak Link’ for U.S. Stock Rally: Chart of Day<br/>Share
> | Email | Print | A A A
>
> By David Wilson
>
> May 15 (Bloomberg) -- U.S. stocks are poised to lag behind European
> and Asian shares because the dollar is a “weak link,” according to
> Jason Todd, a strategist at Morgan Stanley.
>
> As the CHART OF THE DAY shows, the Dollar Index slid in the past
> two months as the Standard &amp; Poor’s 500 Index and the MSCI EAFE
> Index, a benchmark for non-U.S. markets, both surged. The currency
> gauge tracks the dollar’s value against the euro, yen, British pound,
> Canadian dollar, Swedish krona and Swiss franc.
>
> The dollar’s inability to follow the lead of share prices and move
> higher in anticipation of an economic recovery is “a notable inconsistency,”
> Todd wrote in a report yesterday.
>
> While the S&amp;P 500 tends to rise when the dollar drops, it usually
> fails to keep pace with EAFE, the report said. The U.S. index trailed
> in five of six time periods between 1981 and 2007, according to his
> research. EAFE soared about five times as much in dollar terms during
> a seventh period, from 1985 to 1988.
>
> Todd also suggested that the dollar’s slump may enable energy, technology
> and industrial companies dependent on the global economy to outperform
> financial and so-called consumer discretionary companies that rely
> on local markets. Financials may lose their place as U.S. market
> leaders, he added.
>
> “These trends may not play out immediately,” he wrote. European companies
> are worse off fundamentally than their U.S. peers, and financials
> are benefiting from increased lending profits and a capital-market
> revival, he added.
>
> (To save a copy of the chart, click here.)
>
> To contact the reporter on this story: David Wilson in New York at
> [e-mail]
> Last Updated: May 15, 2009 11:12 EDT
>
> * Delicious
> * Digg
> * Facebook
> * LinkedIn
> * Newsvine
> * Propeller
> * Yahoo! Buzz
>

May 16 04:11 PM