It appears that two anti-USD market participants have dropped out of the running since we last checked in. So now it is shaping up like SPY, Euro and commodities against Uncle Buck. Emerging Markets could be thrown in there too. Gold and silver? Palookaville. This can’t make the ‘Dollar Collapse’ cult very happy.
The ‘all one market’ vs. the US dollar scenario is breaking up a bit. Commodities and the Euro are doing well. Gold is hanging around and the US stock market? Not liking the weak dollar so much. The precious metals want to see silver get off the floor, but it’s got a heavy open interest sitting on it. This is a tough market, folks.
Do you remember them? Of course you do. There was/is a whole cult with a central precept that the US dollar is doomed, as if other garbage currencies were any better. People need to understand this is a casino. Prices do all kinds of things in defiance of what people think they should do.
Is this just the rant of some crank blogger or is the buttoned down, oh so respectable US Federal Reserve not trying to stimulate casino mentality (which it is pretending to want to tamp down at this moment)?
I like almost nothing about this market other than the opportunity it is going to present when the distortions start to get shaken out and things become a little more linear or readily understandable. But it is no surprise whatsoever that the USD is rising. In fact, in my best scenario it should rise.
I will be the first to admit that beyond the rising dollar – which makes sense as it is the world’s reserve currency, with claims to it wired in – there are a lot of messed up signals. A version of the above US dollar chart was put in NFTRH 230 nearly 9 weeks ago because it made a bullish signal (EMA 10 crossed over the EMA 35) that has proven reliable in the past. Well what do we know? It was indeed a precursor to a strengthening rally.
Yet in the bottom panel is the gold silver ratio and this touches on the fact that some of my indicators have pretty much stopped working, in the short term at least. The GSR has gone with the USD and broken out but has not yet indicated draining liquidity. The precious metals sector and commodities have predictably gotten croaked by this signal, but not yet the broad stock market.
It’s a tough market and much like with the gold chart shown this morning, we should be aware that anything is possible in the realm of price. Risk should be managed accordingly. I think we are going to get a stock market top in here soon, but this guy running expectations over at the Federal Reserve has done a masterful job of keeping so many seemingly illogical balls in the air all at once.
Hence, cash – for a US player, as represented by the rising USD – remains good until things clear up. Hey look, cash is appreciating.
Everywhere an H&S. An inverted one in the euro that is actualized and targeting higher to 142 or so. A downright mammoth potential one on the HUI. A potentially forming one on the NDX. Not to be left out, here is the updated view of Uncle Buck’s potential H&S.
Interesting times indeed, when considering all the H&S bedfellows. Strange bedfellows in some cases.
USD is technically bearish, and the FOMC just announced something fundamentally bearish ($85 billion in unsantitized printing and monetization). So of course Uncle Buck gets a contrary jolt this morning. There is always the Fiscal Cliff after all.
I am never afraid to point out bullish looking technicals on USD. But this morning I cannot do such a thing, USD bounce or not. USD is bearish below 80.60 or so. Weekly charts by the way, continue to look ‘not good’ as well.
If USD surprises everybody against the odds, good for Uncle Buck. But the chart as currently constructed, sucks.
With all the weird ratios and indicators I use, sometimes just a simple look at a disgusting picture like USD’s weekly chart is needed; in this case to reaffirm the bullish market stance for an intermediate swing.
You know, charts do not get much uglier than this.
Admittedly, the H&S is just theoretical at this point, but the Bear Flag up to resistance and MACD look flat out lousy. This chart reaffirms as well that the d Boys (that’s deflationists) have probably had their day for a while.
Meanwhile, we endure these clowns in Washington and their Fiscal Cliff ™ drama and the mainstream media that fan the flames.
In an extensive NFTRH update this morning – a mini NFTRH actually – we discussed a few macro indicators looking bad like junk bonds, emerging bonds and T bond strength, and several indicators that diverged from the bear case like the gold-silver ratio, LIBOR, TED and good old Uncle Buck, which resides below a thick cap of resistance and failed to get hysterical yesterday.
Here is USD fund UUP in the top panel and Euro fund FXE in the lower. Draw your conclusions. I feel like a stalker, just watching all these things fall down in what I think is a hysterical liquidation by people and entities who should have been making Fiscal Cliff (TM) preparations long ago.
This remains a market that is dangerous for people moving forward based on assumptions and perhaps the bias that these assumptions are born of. Parameters are being broken in commodities and are approaching in precious metals and broad markets. What say we let the market declare before playing hero, eh? What say we get through the election before making grand pronouncements?
This letter was supposed to be clear and concise, and I think it actually was. It is just that it took an unexpected 27 pages to make its points across precious metals, US and global markets and commodities.
NFTRH 211 out now.