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Weak Dollar Beneficiaries Set to Bounce Hard?

I'll be the first to admit I didn't believe they would pump so many trillions of dollars into the TBTF's as they did, via the various TARP and related programs, QE, the current rolling out of QE "lite" and the soon to be enacted QE2, as well as all the POMO's that represent nothing more than a covert monetization of Treasury debt, but they did, and it appears that they will continue to do so until some adult in a position of authority stops them. When that will be, I haven't a clue, for I don't see many adults in our government, or our regulatory agencies, or in our corporate world these days. These massive dollar infusions have done nothing but artificially prop up financial asset prices simply because there is no other worthwhile economic purpose for which they are being used. No one wants to lend, and no one has the capacity to borrow. But the money has been printed, and it simply has to find a home. Somewhere. Anywhere.

So,
as someone once said, sooner or later you just have to hold your nose to keep out the stench, and just jump in anyway. That is the case here. While I may have considerable arguments with the logic and potential effectiveness of the FED's "solution" to kickstarting this walking deadman economy, I have no argument with the fact that some unloved sectors will be secondhand beneficiaries of the FED's largesse via its assault upon the dollar.

I am now looking at getting long commodity and dry bulk stocks under the theory that at some point the dollar is going to get so beaten down that the dollar carry trade will finally make for a huge 2008-style move in commodities and the companies that ship them
(look at a chart and it is ominous how far the $USD has fallen in the past few months - breaking critical support, H & S formation, imminent death cross of the 50/200 SMA). A lot of the charts I am watching show a very nice basing action and positive divergences on their oscillators, and while these charts run counter to the actual current fundamentals in the industries themselves (which are frankly weak to very weak), I believe they are signaling at the very least an impending rush of liquidity into the shares of these companies that will send these traditionally volatile stocks higher.

http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=1&mn=0&dy=0&id=p83913760578

Also, all the major stock indices broke out through technical resistance Friday and they are rallying in the overnight futures markets here in the US Sunday night (with the FED buying no doubt) and in Asia. The Dow and S&P 500 should hit and slightly exceed their late April highs, and this rally could last into mid-October at least.

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&mn=0&dy=0&id=p05801849583

http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=1&mn=0&dy=0&id=p44702086245

Here's the type of setup I'm looking at - I started buying GNK Friday morning - this is the kind of "sawtooth" chart formation I absolutely love and while this stock is in an unpopular group (dry bulkers) it is by far fundamentally the best in the group, and a leader in any rally in the bulkers:

http://stockcharts.com/h-sc/ui?s=GNK&p=D&yr=1&mn=0&dy=0&id=p05375030736

Here are others I HAVEN'T bought (yet) but which are in another unloved industry, and have recently projected downgraded expectations for the near term... yet the chart tells me a different story, for despite less than good current news these stocks are holding their ground in a solid base, and started moving up on decent volume on Friday. Note that in all cases their MACD and RSI have been RISING since the May 6 flash crash even as their share prices have been declining - that signals positive technical divergence:

http://stockcharts.com/h-sc/ui?s=AKS&p=D&yr=1&mn=0&dy=0&id=p97069980299

http://stockcharts.com/h-sc/ui?s=STLD&p=D&yr=1&mn=0&dy=0&id=p76926884909

http://stockcharts.com/h-sc/ui?s=ZEUS&p=D&yr=1&mn=0&dy=0&id=p11891176267

There are plenty of others and if I have time tonight I'll be looking at some oils too.

Here is a double leveraged ETF going LONG on the basic materials sector (commodities). Its in breakout mode and looks headed into the low 40's area (42-43) in the next 3 weeks (note, volume is still weak here but a ramp in volume would be a significant plus for this ETF):

http://stockcharts.com/h-sc/ui?s=UYM&p=D&yr=1&mn=0&dy=0&id=p81266234986

So I guess this is where I hold my nose and jump in. As a personal aside I believe that what Bernanke and the FRB are doing at the behest and for the benefit of the large banks borders on the unconscionable. If carried to its logical conclusion it will destroy the dollar and send all the major currency countries into a competition to see who can devalue their's the fastest in order to grab international trade advantages. It will cause huge increases in the prices of virtually all the major commodities - industrial metals, ags, precious metals, fertilizer, oil, coal, etc. And ultimately it could cause incredible hardship for the middle and working class, and the millions of unemployed, as those prices feed down to the people who can afford them the very least.

But today it is not my job to pass judgement. Here I must simply state that there is potentially lucrative trade to be taken, and I will take it.




Disclosure: Long GNK