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Hold On To Your Hat

The Almighty Dollar is returning.

The trade is net long and seriously net short the Euro.

The Fed will do nothing tomorrow other than issue forth the same platitudes delivered twice over the last few weeks.

And the stock market does NOT like a strong dollar.  Why?  Because foreign earnings go DOWN when the buck is stronger and this guarantees a nasty surprise for Q4 earnings.

However, this provides the backdrop against which the Fed WILL take action in Jan 2012.

I stand by my belief of a strong downshift sometime in the next 10 trading sessions and then some modest recovery for the end of October.

But I think Jan 12 will get some sharp downdrafts to backstop the Fed action of Jan 24-25, 2012.

GLD and commodities will decline sharply, led by copper and oil.  This will lower the inflation stats which further backstops the ability of the Fed to take action in Jan 2012.  Hey oil could drop to 72 in a matter of weeks.

Again, I maintain this will occur to further the re-election of Obama.  The stronger dollar takes a lot of "pressure" off of key domestic economic issues and I believe the index will peak back in the low 80's in November 2011.  Thus the oilfield services and producers will get slammed, refiners probably a little better.

Check out the weakness in SLB, APA and APC, which I figure will go to 55, 80 and 60 respectively in Oct 11.  FCX to 30, AA to 10, COP to 50, I mean it could get real ugly for awhile.