End of Week Dollar Update

As noted a few posts ago, things are certainly getting interesting lately. Jawbones have been getting a lot of exercise with the Fed, ECB and China falling all over themselves to declare how tough they are on inflation. They are not tough. Jointly, they and other global bankers created this mess. But that is a screed for another time.

For this entry, I am going to keep the charts to a minimum. Just a look at the US dollar's daily progress because so much of the goings on in global markets revolve around talking up Uncle Buck to quiet the din of a suddenly inflation sensitive American public.

Here is the dollar in a well defined uptrend channel.

The channel top will present some resistance which may be good for a trip back down to the channel bottom before another try at the stiff lateral resistance and 200 day moving average. That will not be easily surmounted. But in the meantime the Dollar Heads for Biggest Weekly Gain in Three Years Before G8.

Speaking of the dear old global consumer of last resort, it appears that Americans may be spooked about inflation but that apparently did not inspire them to invest in something tangible and timeless with the government's rebate [alt: bribe, restitution, band aid on an open wound inflicted by a monetary chainsaw] checks sent out in May. No, the public went out and did what they always do; they bought an LCD television to watch the NBA finals with. Wall Street cheered the much higher than expected retail numbers this week without much talk of the reason behind it.

Meanwhile, I continue to hold my gold stocks while being savaged daily. As you know, I saw this correction coming, took risk management action (it never seems like enough though) and have set parameters whereby this correction 'should' end if all is healthy and well. I believe that a short term top in the dollar will coincide with a rebound in the gold stocks and curiously, the broad stock market as well. Very recently the gold sector and the stock market have been declining together and I expect them to rise together.

The question will then become "which is real and which is Memorex?" as the Trannies sport a reverse symmetrical triangle topping pattern and decide whether they will rebuff Dow theorists who began getting excited perhaps a bit prematurely. As for the gold sector, it will be 'Memorex' if one can believe that Paulson and Bernanke are for real as inflation fighting, strong dollar advocates. Can one believe that? In one's dreams I suppose.

Oil continues to be a bothersome wild card that is really messing up the play in the gold miners as contraction vehicles. But as my friend Otto says, gold is just more of a value for long term thinkers when measured in oil. We really needed Paulson put some lipstick on the dollar and we really need oil to decline. Meanwhile, yield curves are resetting from panic highs. They did the same thing in 2002 before heading higher. Right now the $TNX-$IRX ratio is between a 38% and 50% Fibonacci retrace. I expect the yield curve to head higher when the Jawbones get a handle on inflation expectations. We should be rooting for the Jawbones in the short term, not against them.

There is much more to come and as they say, "when the going gets tough, the tough get going". It is time to get going with analysis that lands us on the right side of the markets no matter what may lay ahead and I am again getting interested in the Asian and other global markets and select US stocks/sectors. But for now I am going to get going (sloppy word play, I know) and bid you a great weekend. The weather is amazing in the Northeastern US lately.