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Is the "Dollar Down - Stocks Up" Relationship Finally Decoupling?

If I were to tell you a week ago (in light of the recent near picture-perfect inverse relationship between the dollar and stock prices) that with the dollar down more than a full percentage point in a single day against the Euro, the Dow would only be up 30 points that day and the S&P would only be up 5 points, would you have believed me? And yet here we are with exactly those figures at today's close. Are we finally getting to the point where-- as things always were traditionally-- a sliding dollar is perceived as BAD for stocks? Maybe. And if that's the case, then watch out, because "traditionally" (unlike now) when the dollar went up there was no dollar carry trade to explode and thus cause a panicked dumping of risk assets (such as stocks).

Meanwhile, how's this for weirdness: Despite the horrendous day for the dollar, long-term Treasury yields were DOWN. So, who's buying long-dated treasuries and why? It's not foreigners (unless they're being bold enough to predict an imminent dollar bounce), and it's not anyone with any sort of an inflation fear (despite the slide in the dollar). So if the bond market TRULY is "the smart money", what is it telling us? What it's (seemingly) NOT telling us is that we're headed for a stronger economy down the road.

Man, on a daily chart it sure looks as if the S&P wants to break out of that little three-day ascending triangle and set new post-crash highs. Well, if it does, I'm still planning to stop out half my SDS at 1115. Meanwhile, I'm still 60% in SDS, 20% in DUSA (which looks to me as if it now needs to consolidate for a week or three between $1.40 and $1.60 before quickly moving to the $1.80 to $2 range) and 20% in cash.