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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Strong Dollar Steamrolling Stocks By: Charles Payne 11 comments
    Oct 26, 2009 1:41 PM

    Some realities of life hit hard even when we know that they're inevitable. Take some of these recent unnerving trends:

    The Minnesota Vikings had to lose. It seemed like the Vikings cheated losing on more than one occasion this season but yesterday it felt like they were outmatched from the very beginning when Pittsburgh put it on them. (By the way, there was a hit in that game between Adrian Peterson and a defensive back on the other squad named William Gay. Peterson crushed the guy, and then stopped on him. It reminded me of that hit back in the day between Isaiah Robinson and Earl Campbell.) Two plays later, Favre threw an interception and the Steelers returned it for a TD and that sealed the win.

    A couple other trends said to be on the verge of coming to an end are the dollar's role and US superiority internationally. Today, the dollar is exhibiting signs of life, which is spooking the equities markets. It's amazing how swiftly stocks gave up ground when the dollar rebounded. At this point, we want to believe that some of the rally is occurring not only because of the weak dollar. We'd like to believe that it's not all about giant multinational corporations making money from overseas but also from a rekindling of domestic demand.

    The reaction to the rebound in the dollar is worrisome to say the very least. It's not that stocks aren't overvalued in the short-run or that gold hasn't had a move based mostly on inflation in the pipeline, but rather investors have become unrealistic about periodic pullbacks. I think that we are entering a period of serious volatility marked by triple-digit point sessions to the upside and downside on a mix of profit-taking and basic concerns. I don't see panic (yet), but I see investor hesitation. In a market that needs to swim all the time, any pause could be misconstrued as something more sinister.

    If ever there was an ominous chart, it's the two-day Dow Jones Industrial Average chart. Stocks came out of the gate with vigor. Once again, the focus of investors was on the safety of "Blue Chip" names. Right now, there are 2,063 decliners as compared to only 875 advancers. To be honest, I was trying to figure out why the market surged at the open. Then the question was...did anyone get the license plate of the truck?

    Two-Day Dow Chart

    This kind of angst is natural when it comes to the stock market. It's not fun, but inevitable.

    Themes: Afternoon market outlook, Dollar
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  •  
    Hello fellow Steelers fan! That licking Petersen put on Gay is only challenged by what the dollar is doing to the markets. I too, was suprised to see futures up this morning.

    I eased out of the market late Friday. Trickling some back in today.

    The memorable Earl Cambell hit is still my all time favorite, except about 50 from Jim Brown.
    26 Oct 2009, 01:56 PM Reply Like
  •  
    By the way, Are you FOX News' Charles Payne? If so, thanks for the heads up about (NXTH). My second best performing stock this month. Up 34.5%.
    26 Oct 2009, 02:00 PM Reply Like
  •  
    Hi Charles! Mayascribe told me to come over here, so here I are.

    I see you're onto the importance of the action in the dollar, so I'd like to offer this chart I put together, for your readers to look at. I can't stress enough how clear it has become how the stock markets and the dollar are now "solidly" locked in an inverse relationship. I don't know how many times I've written about it, trying to explain how important this is, so if you don't mind I'll just put a link to one of my previous comments about this relationship:
    seekingalpha.com/artic...

    An here's the chart. I hope you and your readers find it helpful.
    stockcharts.com/h-sc/u...
    26 Oct 2009, 06:47 PM Reply Like
  •  
    Rocks: I've been reading Charles' stuff. He's really good, authentic. Not sure how much interaction you're going to get from him. We'll see.

    He'll likely have 3000 followers by this time next year. Probably will have 10 more by this time tomorrow, just from our gang.

    Your chart is only getting wider. Looks like a reared up p-oed serpent, mouth agape, striking at my wallet. If King Dollar keeps strengthening, I'm going to sprint away from the snake as if my hair's on fire. Too many foes. Reminds me of Dirty Harry: "Know your limitations."
    26 Oct 2009, 07:38 PM Reply Like
  •  
    No worries Maya, I don't expect any response from Charles. I just want to contribute to the thread and offer the chart again because it's so revealing. The most important thing to notice is the relationship. It's telling us that if the dollar surges, the stock market drops.... almost assured.
    26 Oct 2009, 07:44 PM Reply Like
  •  
    Hi Maya & Rocks! BTW, I like the chart. A picture is worth 10,000 words, or so they say. There's another relationship that I think is interesting: US$ vs Crude Oil (WTI). If the US$ goes down, WTI tend to go up in dollar terms since the world trades oil in US$ and when the dollar goes down it takes more dollars to buy a barrel. I'll feel like a recovery is really underway when we see WTI and the US$ going up together. That should only happen when demand is on the rise. Of course, I'd like to see this happening for more than a few days before I act.
    26 Oct 2009, 09:25 PM Reply Like
  •  
    On Oct 26 09:25 PM Mark Bern wrote:

    > Hi Maya & Rocks! BTW, I like the chart. A picture is worth
    > 10,000 words, or so they say. There's another relationship that
    > I think is interesting: US$ vs Crude Oil (seekingalpha.com/symbo...).
    > If the US$ goes down, WTI tend to go up in dollar terms since the
    > world trades oil in US$ and when the dollar goes down it takes more
    > dollars to buy a barrel. I'll feel like a recovery is really underway
    > when we see WTI and the US$ going up together. That should only
    > happen when demand is on the rise. Of course, I'd like to see this
    > happening for more than a few days before I act.<

    I could put that chart together for ya Mark, if you'd like to see it?
    26 Oct 2009, 10:20 PM Reply Like
  •  
    I made the trip over at Mayas request. Will pick up and follow along. I dont think the market is from rekindled domestic demand. Just the dollar and the govt hype. The hype is getting weak and so now we are getting to just the dollar.

    I dont think the dollar can do it alone and will fall back. Rocks may be right it is just window dressing for the G-20 which means we wont get far into Nov.

    It does not bode well.
    26 Oct 2009, 10:29 PM Reply Like
  •  
    Update folks. Two Elliott Wave theorists I subscribe to are still seeing a "possibility" of one more thrust up in the market. Personally, I can't see it happening if the dollar continues to strengthen, but having said that, I can also see the argument that recent action doesn't necessarily have all the hallmarks of a top either. In any event, one more thrust (if it happens) would likely be pushing the very limit.

    I strongly believe that if the market move up from here, it should be used as a great opportunity to exit and leave the dangerous scraps for somebody else. You've already gotten the biggest chunks of cheeze out of the mouse trap, and it hasn't gone off yet.
    26 Oct 2009, 11:31 PM Reply Like
  •  
    Thanks so much for your kind words. I'm spread really thin but will try to reach out. I have my research firm that keeps me busy wstreet.com, Fox Business work and a radio show plus my family. But I will try to chime in whenever I can. Thanks a lot. CP


    On Oct 26 07:38 PM Mayascribe wrote:

    > Rocks: I've been reading Charles' stuff. He's really good, authentic.
    > Not sure how much interaction you're going to get from him. We'll
    > see.
    >
    > He'll likely have 3000 followers by this time next year. Probably
    > will have 10 more by this time tomorrow, just from our gang.
    >
    > Your chart is only getting wider. Looks like a reared up p-oed serpent,
    > mouth agape, striking at my wallet. If King Dollar keeps strengthening,
    > I'm going to sprint away from the snake as if my hair's on fire.
    > Too many foes. Reminds me of Dirty Harry: "Know your limitations."
    5 Dec 2009, 08:43 AM Reply Like
  •  
    I love this format and will try to post more stuff. I write everyday for my own service wstreet.com as well as contributing to the Fox Business Network and I have a radio show in the top market in the coutry.
    5 Dec 2009, 08:45 AM Reply Like
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