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And the Answer Is....
And the answer is….the Dollar Index is going lower!
Figure 1 is a weekly figure of the US
Dollar Index. This is the same graph we have shown for weeks upon weeks
now, and with a weekly close below the key pivot at 74.62, there is a
high likelihood that the Dollar Index will trade lower.
Figure 1. Dollar Index/ weekly
Key pivot points are the best areas of support and resistance, and at the end of this week, price will close below a key pivot or support level. Just looking at the
chart, we note that every close below a key support level but one has
resulted in a significantly lower Dollar Index. That one instance is
highlighted inside the gray oval and defined the 2008 bottom, which
were the all time lows for the Dollar Index. A close below support
levels is how one defines a down trend. Old support is new resistance,
and I would not consider getting long the US Dollar Index until this
level is cleared. We are playing probabilities here.
So what does a lower Dollar Index all mean? I am sure you know the
answers by now. In a macro sense, we will still have policies in this
country and in Europe that “kick the can down the road” thus assuring
the destruction of fiat currency. In other words, some sort of deal will be struck that bails
out Greece and that raises the debt ceiling here in the US. The deals
will likely fall short of addressing the real issues, and little will be
solved except that we can have the “crisis” another day. Risk assets
will be preferred, and precious metals will continue their out
performance. Equities will continue to perform well, but upside
potential is capped by valuation, economic, sentiment, and inflationary
concerns.
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Clean yet overly simplistic chart. What you seem to be missing is that a pullback to support & breakdown has already taken place and the more recent price action howering back around your trendline is a mass of heavy buyers taking on some decent sized long positions while trapping the late shorts.
Even though this chart resonates well with the current economic climate, price-action tells a different story. Whether its just a short squeeze or a mid-sized reversal, it is yet unclear but make sure you pay attention to where smart money is flowing.
adr for Sec. of Treasury replacing Giethner. You are thinking like a real politician now.
Turbo Tax Tail Risk?
We've known for a long time that we need that weaker dollar in order for corporations like Apple to keep blowing away earnings. When you have 60% or more of your sales coming overseas and you get a 10% drop in the value of the dollar it is pretty easy to manipulate your earnings. The timely downgrade a week before you report helps as well.
It is so hard to be a rational person in these times. We knew the market in 1999 was based on BS and unsustainable, we knew the market in 2008 was based on BS and unsustainable, what makes it different this time?
I guess they say it's sustainable because the market is based on government debt. I mean we've raised the debt by $7 trillion or so in three years without any real consequences. The market is cheering a deal that will give us a $20 trillion national debt over the next 5 years. Keynesians say debt doesn't matter. As long as the world agrees to kick the can then it can go on forever. Only when the masses try the same tactic will the game finally be over.
I think I will claim my debts as losses on my taxes so I do not have to pay any for the next few years. Then I will go out and buy an Audi R8 on my credit line and expect the government to pay for the loan when I default. I will also expect the bank to loan me $1 million with no collateral since I will be good for it in the future, since my future earnings should count as money in the bank right now.
Keynesians say debt doesn't matter.
I always wondered which school of economics Darth Cheney subscribed to. Thanks for clearing that up!
If the US treasury marked its gold to market then the worse things get (ie gold goes higher) then the better things get on the balance sheet. That is how the Euro is set up and when gold blows up the Euros asset blows up right along side....least thats how I understand things from a strictly scared ignorant peasant's point of view....
August---No SS checks, no transfer payments to States, hospitals get no reimbursements, no miltary checks.
September---run on banks, no $'s available. Gold skyrockets, stock market collapses
October---Bank holiday ,gold siezed, food vouchers issued, Warren Buffet says good time to buy stocks. China buys Rockefeller Center including NBC, Exxon GE and J P Morgan at 270 Park Ave
November---Unemployment dips below 5%. China sets up textile apparel plants throughout the US making cheap garments
December---Obama lights Christmas Tree in Washington DC touting he has brought Real Change to America
Dont worry, this only goes on for a couple more months till The Destroyer arrives, then most of the worlds population will no longer be such a burden.
And who or what is The Destroyer? I'm not being confrontational. I really want your opinion. There are so many theories rolling around right now it's tough to nail one down. Elenin? A Nuke attack? Fukushima? The New Madrid lets it rip or Yellowstone?
Disobey.
Could be Elenin.
http://www.activistpost.com/2011/05/bad-news-from-nasa-proof-that-comet....
http://ssd.jpl.nasa.gov/sbdb.cgi?sstr=C%2F2010+X1&orb=1
It means that the central bank America is currently stuck with is monetizing European bad debt as I write. The dollar is the only currency that prints its own on scale to accommodate the EURO TARP program and I don't care if it doesn't show on any balance sheet I'm sure the American Taxpayer is unwittingly paying through inflation and risk transfer of the bad debt that JP Morgan, GS, and Stanley et al are holding CDS on. Come to think of it, it doesn't require any expansion of a balance sheet, it merely trades good (or semi-good) Treasuries for Euro junk at par. Just come to the window brother and feel the power.
Whether the dollar is up or down the metric between it and gold has changed as markedly as it did when gold blew through its post 1980 vector point resistance ceiling of $511.50. Gold has been declared money by the market this summer and it isn't going back. The only question is what is actually in the vaults of the US Treasury where America's gold is suppose to be held.
Theres nothing in Ft Knox, and even if there was the claim is $200 billion worth? Big deal. Thats what the Treasury has removed from govt pension funds to use as operating funds over just the last month or so.
This couldn't be a more timely post. Great job!
thanks!
Ill take complete financial destruction for 600$ Alex.
I think you meant to say:
"I'll take complete financial destruction for $600,000,000,000,000,000, Alex."
Ben you have hit the Daily Double, for an infinite amount ink and complete global serfdom: "The answer is - Gold."
Is gold Money?
<crickets chirping>
No.........it's...an........asset!?!?!
Behind door #3 we have QE3
And then the dollar even LOWER!
Europe will fuck it up just enough so the dollar can recover
REST ASSURED! :)