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Dollar Index: One Way Or Another, It's Going To Hurt

Tyler Durden's picture




 

From Nic Lenoir of ICAP

I have been constructive on the dollar index for a little while. I had drawn attention a few weeks back when we broke the 60-dma as it has been an excellent envelope since 2008 for the price action bullish or bearish. My thinking was that one should try buying on a retest. Sure enough we almost saw tick-for-tick the moving average on Friday (at a time when most certainly very few bought).

What now? Well one cannot ignore that from the lows of early November to the local highs of November 30 the wave pattern looks like a corrective a-b-c in a generally bearish trend. However as you know looking at the chart bigger picture I believe 2008 marked the lows and we are about to embark on a major bullish move. If that were the case one could view the USD strength of November as bullish waves piling ahead of a larger wave 3) up. To support that argument it is interesting to note that the low of Friday also corresponded to the 76.4% retracement of the November move. From here if 80.85 is bypassed the bullish trend will be confirmed and we will go through the 200-dma towards 95 at the minimum. Conversely, you now have the luxury to set a stop at entry level, and people who hate the USD or want to get short tactically can sell if we take out Friday's lows as the market should go down to at least 77.80.

A strong DXY would be in contradiction with equity strength according to historical correlations, but let's not forget despite today's euphoria that strength at the start of the year following a year-end rally has proven to be a major headfake in the past few years... food for thought!

Good luck trading,

Nic

 

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Mon, 01/03/2011 - 18:01 | 845221 Flapjackmaka
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Stocks will celebrate.

What's everyone's thoughts on where the dow will end up at the end of 2011?

Mon, 01/03/2011 - 18:04 | 845230 goldmiddelfinger
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666

Mon, 01/03/2011 - 18:14 | 845254 Sudden Debt
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because everybody is yelling "way up" it will be way down.

These last 3 years, it has always been different from what is being predicted.

Now it won't be any different.

 

Or as the addicts would say: "THIS TIME IT'S DIFFERENT!! WE'VE GOT A SYSTEM!!"

 

 

 

Mon, 01/03/2011 - 21:09 | 845504 tgatliff
tgatliff's picture

I doubt it because there

1) There is virtually little to no volume to speak of.  

2) The Primary Dealers need the equity valuations to stay high.

Meaning, to have a big sustained correction, we would need to see more "real" volume (aka Less HAL 9000s).  There are only so many computers than can suffer from temporary insanity.  A more likely outcome I think would be what happened in the late 1930's which is you see a big drop and then things just come to a standstill for a couple decades...

Mon, 01/03/2011 - 21:48 | 845565 dark pools of soros
dark pools of soros's picture

TPTB have about 5 months to cook up some event to have it crash and either ignore QE3 and let it burn or push it through for another year of kick the can

Mon, 01/03/2011 - 19:09 | 845348 spinone
spinone's picture

way up, and bread will be $10/loaf, if you can get it.

Mon, 01/03/2011 - 21:57 | 845580 Lord Koos
Lord Koos's picture

You'll be able to buy a loaf of bread for a 90% silver dime.

Mon, 01/03/2011 - 22:31 | 845634 swmnguy
swmnguy's picture

I see what you did there...

Mon, 01/03/2011 - 21:10 | 845500 something fishy
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I think S&P 500 could go to 1400 max but then a significant correction in 2012

And Nic, thanks for the great analysis! I always look forward to reading your posts

 

Mon, 01/03/2011 - 18:03 | 845223 hedgeless_horseman
hedgeless_horseman's picture

Nic, does the record not show the technical analysis of any index, especially the DXY, to be a complete waste of time equivalent to measuring butterflies' wing flaps in Asian jungles? 

Mon, 01/03/2011 - 18:06 | 845237 LeBalance
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Especially any market entity, whose true identity is NOT what is being modeled in the TA, but instead is a manipulated con game.

Mon, 01/03/2011 - 18:31 | 845293 Max Hunter
Max Hunter's picture

TA's are a self-fulfilling prophecy.. That's not to say they don't work.. I think some over analyze.. A hand full of indicators at most are all that's needed..

There are too many fundamental concerns and threats that would blow TA's out of the water at this particular time.

Mon, 01/03/2011 - 19:28 | 845385 Hansel
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"There are too many fundamental concerns and threats that would blow TA's out of the water at this particular time."

No.  Some TA will come along after the blow up and say people weren't using the right technical indicators.  Some TA will always be right, the same way some elliot waver will always draw the "correct" wave count and claim brilliance, or some fundamental analyst looking at the "correct" metrics.  Someone will always be "right" and willing to sell you some snake oil.

Mon, 01/03/2011 - 21:51 | 845568 A_MacLaren
A_MacLaren's picture

Fundamentals, like TA, only matter in free and unmanipulated, err unmanaged, markets.

The rest of the time, they are both like broken clocks, correct twice per day.

Mon, 01/03/2011 - 18:03 | 845229 goldmiddelfinger
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A higher dollar and lower home prices will surely send gold higher

Mon, 01/03/2011 - 18:09 | 845247 Sudden Debt
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anybody seen the key of the cabinet where we store the binoculars for the lookout?

 

Mon, 01/03/2011 - 18:15 | 845263 monopoly
monopoly's picture

It is all just insanity. "Binoculars for the lookout". goldmiddlefinger, lolol.....

I won't get involved int his crap. PEs of 90 to 150. No thanks.

Mon, 01/03/2011 - 18:28 | 845288 Carl LaFong
Carl LaFong's picture

Interesting tech analysis. Nick is always thought provoking but I'd like to know how much money will everybody else have to print in order for this come true in the non-technical/funadamental world?

Mon, 01/03/2011 - 23:21 | 845722 GoinFawr
GoinFawr's picture

Mark Carney stands at the ready with his Great White Northern printing press, eh. Just give 'im the word and he'll git 'er done; along with all the other GS alumnis in top CB positions worldwide.

Mon, 01/03/2011 - 18:42 | 845313 Gordon Freeman
Gordon Freeman's picture

Gold, b--oh, never mind...

Mon, 01/03/2011 - 18:43 | 845316 Alex Kintner
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Is 2011 the year that the US is officially declared a Banana Republic? And then do they take away Uncle Ben's printing press? And would that result in an S&P Dip (that we can buy)?

Seriously, how long can Ben print until the Chinese tell him "Enough.".

 

Mon, 01/03/2011 - 22:03 | 845587 hamurobby
hamurobby's picture

Seriously, how long can Ben print until the Chinese tell him "Enough.".

 

Just after the announcement of qe3 would be my guess.

 

Mon, 01/03/2011 - 18:54 | 845326 DosZap
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Newsflash, China already has said ENOUGH, by their actions.

How to tell when the Chinese are lying, same as Politicians.

Tue, 01/04/2011 - 06:18 | 846055 sureseam
sureseam's picture

Judging the Chinese by their politicians/ leaders put them on a par with western politicians.

Only, perhaps, more perceptive and competent - hard to tell.

Mon, 01/03/2011 - 18:55 | 845329 Buck Johnson
Buck Johnson's picture

2011 is going to be a crazy year, just watch.

Mon, 01/03/2011 - 19:11 | 845350 Humpty Pundit
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I wish in 2011 the Bernank could finally figure out how to create inflation in house prices rather than in the price of bread and circus tickets! I guess he hast to take care of his fellow clowns and jugglers...

Mon, 01/03/2011 - 19:18 | 845358 Ferg .
Ferg .'s picture

I sure as hell hope it's heading higher . Have a load of USD longs across the board : GBP/USD , USD/JPY , USD/CAD , NZD/USD and AUD/USD . All positions apart from NZD/USD are well in the green with stops moved to break even . Of course much of the basis of for these trades is converges around the idea that we'll see an equities correction in January .

Mon, 01/03/2011 - 19:21 | 845366 Wheatman
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Great advice Nice. Go short or long, depending on the situation. ummm yeah  ...

Mon, 01/03/2011 - 19:24 | 845371 Bay of Pigs
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95 minimum DXY? You've got to be kidding. That's more optimistic than any $2000 gold call and by a wide margin. Where exactly does this "dollar strength" come from Nic?

Mon, 01/03/2011 - 23:51 | 845780 jdrose1985
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MARGIN CALL

Crude to $10?

Mon, 01/03/2011 - 19:26 | 845376 dcb
dcb's picture

this is my dollr index chart, this is dollr bear, dollar index is opposite. to me dollar looks in down trend unless break lower green

MACD hasn't given the sell signal

http://www.freestockcharts.com?emailChartID=c32d50a6-4681-4d58-82a0-53c330fb70af

Mon, 01/03/2011 - 23:28 | 845738 GoinFawr
GoinFawr's picture

Dollar index looks like one continuous frickin' fractal head a shoulders top within a head and shoulders top within a head and shoulders top and so on, and so forth.

 

Mon, 01/03/2011 - 19:28 | 845380 greenewave
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Watch the video “Economy Stage 4 Cancer Patient ~ Stocks Rigged” at (http://www.youtube.com/watch?v=BrXcpWKRDf8).

Anonymous –

It’s unbelievable that it has gotten to the stage where we actually know without a shadow of a doubt that the U.S. economy is RIGGED! I can’t wait for the PONZI scheme to continue!!

Mon, 01/03/2011 - 19:31 | 845391 Quinvarius
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The Dollar is going into the toilet vs everything except maybe the Euro.  Don't expect a DXY rally, which is over 50% Euro, to be any indication of anything, if it even happens.  A rising dollar will do nothing to protect a badly timed gold short.  Gold is going higher as global fiat dies. 

Mon, 01/03/2011 - 19:56 | 845428 GetReal
GetReal's picture

When a ship leans to one side because too many people are standing on that side, it's not long before the crowd moves to the other side. The dollar has fallen a long way and gold has risen a long way. It wouldn't surprise me if we see a significant temporary reversal.

Mon, 01/03/2011 - 20:59 | 845492 UninterestedObserver
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Your analogy sucks

Mon, 01/03/2011 - 23:21 | 845721 akak
akak's picture

Bad analogy.

Gold is on an altogether different, watertight ship, watching in amusement as the USS Dollar, the HMS Pound, the SS Euro, and the Yen Maru all spring leaks and continue to sink.  Just because they alternate in sinking the fastest, that does NOT mean that the ones not sinking the fastest are therefore "rising" --- they ALL have an unbreakable date with the benthic deep.

Tue, 01/04/2011 - 01:06 | 845877 OldPhart
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When a ship leans to one side because too many people are standing on that side, it's not long before the crowd moves to the other side.

Sorry, no, when a ship leans like that, the people fall off and drown.

Mon, 01/03/2011 - 19:36 | 845401 El Hosel
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   USD Yen Euro and Pound all suck about the same wind don't they? Dollar can rally, there are flying pigs in every direction...  TPX ( mattress anyone ? ), GM ( how about a new truck ), AAPL ( Gadgets replacement cycle )

Mon, 01/03/2011 - 21:21 | 845521 Cursive
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 there are flying pigs in every direction...

This is a good check on the perspectives of many here.  Does "sound" money like gold seem more valuable than FRN's?  Sure, but it doesn't have to be rational or logical for it to happen.  Why is BAC still alive?  C?  A rising dollar would be just the next sordid chapter in this perverse cautionary tale of a financial market.

Mon, 01/03/2011 - 20:42 | 845481 Dr Hackenbush
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Been eyeballing the double top and massive head and shoulders for some time now.  We are now sitting on the neckline.  I think it retest historic lows.

Mon, 01/03/2011 - 21:03 | 845497 putbuyer
putbuyer's picture

Time to tell the truth. If you are not a conservative you are an asshole. An entitlement drone. You need to be defeated and fast. Trying to assimilate you fuckers is at waste of time. Join or die!

JOIN OR DIE

http://libertynovelty.com/

Mon, 01/03/2011 - 21:26 | 845536 Incubus
Incubus's picture

Oh, shut the hell up with your partisan bullshit and try to find your brain.

Mon, 01/03/2011 - 21:46 | 845553 gwar5
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I'm easy.

I'd just settle for anybody who is not a marxist/socialist unemployable dropout who burns cars in birkenstocks wearing a ski mask

Mon, 01/03/2011 - 21:54 | 845574 dark pools of soros
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yeah the same conservatives that protect insurance antitrust laws which lead to the majority of America's issues

http://thehill.com/homenews/house/63997-democrats-want-to-revoke-insurances-antitrust-exemption-in-healthcare-bill

 

Mon, 01/03/2011 - 23:03 | 845689 lawrence1
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There is a growing body of empirical research showing that conservatives have difficulty assimilating new information, changing viewpoints and other characteristics not conducive to intelligence.  A recent study I read about found that they generally dont make eye contact nor mirror the eye movements that reflect sympathetic acknowledgement.  In other words, they have inferior brains.  (Sarcasm, the last sentence.)

Mon, 01/03/2011 - 21:16 | 845513 liberal sodomy
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We have once again reached a moment where there is absolutely NOTHING to buy.

Mon, 01/03/2011 - 22:57 | 845674 wisefool
wisefool's picture

+1. Bleeding over ideas from mort's thread. 21 sq ft. of retail for every man woman and child. who knows how much commercial/cubicle space, and several years supply of residential housing. Many of which are 3000+ sq ft McMansions occupied by empty nest baby boomers.

80% of R/E is in jurisdictions with property tax, 100% of it requires HVAC, maintenance and security.

70% of people I know who can work from home, would work from home for what ever percentage of time their job role allows. And employers are finding out they get more out them and cheaper that way. No paying for HVAC, toilet paper,parking,etc. Opportunities for sexual harrasment,bullying,sandbagging,stealing paper from the copier, workplace injury,etc; are non-existent or fully logged.

Even in those jobs that can't work from home, teleconferencing eliminates the need for travel. GenY'ers have overwhelming stated (in workplace surveys) that meetings are a waste of time. conference rooms are a large portion of commercial space.

So .... We don't need 50% of the physical plant we already have. Much less produce more? I am the first to trash economic PhDs. But somebody should also have to take the blame for the real estate overbuilding we did in every sector.

Just think if we built 1 new,modern oil refinery with all those guys swinging hammers over the last 15 years? How about 1 modern nuke plant that we would not even have to spool up (fuel) just so we could remember how it it is done? How about a few modern desalination plants?

With the money we pissed away on RE over the last 10 years we could have built these things to meet the highest environmental and aesthetic standards to ameliorate the concerns NIBYs. Instead, they are going to have squatters in derelict McMansions, Strip Malls, and other unused space that blights countryside even more. And don't get me started on wind-farms or solar plants.

My 8 year old niece watched the Pixar movie Wall-E and got it the first time. Yet grown, educated, adult R/E developers , architects and their bankers still don't get it.

Tue, 01/04/2011 - 01:38 | 845917 RockyRacoon
RockyRacoon's picture

Other than precious metals I believe you are right.

Mon, 01/03/2011 - 21:22 | 845524 sbenard
sbenard's picture

Here's to the head fake!

Mon, 01/03/2011 - 21:49 | 845567 HarryWanger
HarryWanger's picture

but let's not forget despite today's euphoria that strength at the start of the year following a year-end rally has proven to be a major headfake in the past few years... food for thought!

Man, Nic, you've been wrong on the market pretty much all of the second half of the year. No head fake today. We may see a slight pull back soon but no correction is looming. Too much Fed to make it keep running. Another good year on tap to be long.

Mon, 01/03/2011 - 23:50 | 845735 akak
akak's picture

But Harry, when I was having sex with your wife this afternoon (and with NO pullbacks, slight or otherwise) she was complaining that you are NEVER long!  What do you have to say for yourself?

PS: Your wife also told me you have nothing but disdain for "hard" money.  She, on the other hand, seemed to greatly appreciate the soundness of my monetary unit.

Tue, 01/04/2011 - 00:30 | 845832 jdrose1985
jdrose1985's picture

Get a grip..

Tue, 01/04/2011 - 01:49 | 845911 akak
akak's picture

Funny, she kept screaming the same thing!

Tue, 01/04/2011 - 03:40 | 845996 Sudden Debt
Sudden Debt's picture

+10 :)

Mon, 01/03/2011 - 22:02 | 845588 gwar5
gwar5's picture

Flash: William Daley, JPM executive (Richard Daley, Jr's brother) to be possible next pick for Obama Chief of Staff. 

Reaction: Will give the dollar a boost to have the criminals working the silver shorts directly out of the White House

 

Mon, 01/03/2011 - 22:20 | 845612 Yardfarmer
Yardfarmer's picture

the year end closing at 78.22, has projected initial support at 74.90 area in general with resistance forming at the 81 and 85.50 levels for 2010. A year-end closing for 2010 below 81 will signal that a low in 2011 is likely.  martin armstrong

 

 

Mon, 01/03/2011 - 23:36 | 845758 Glasgow Gary
Glasgow Gary's picture

Bless you Nic. I'm not surprised that you are bullish on the USD. After all, long USD is one of the most popular views among the sophisticated set who don't seem to realize that short USD is not, in fact, the majority view or position. Good luck.

GG

Mon, 01/03/2011 - 23:56 | 845788 Sherman McCoy
Sherman McCoy's picture

I love you ZH, you bring an audience to the most obscure and generally awful pundits on the planet. This Nic fella who works for a bond broker, what's his track record? Every call I've read of his has been about as accurate as byron wien's. I'm sure there is some point to  this piece, I just can't figure what it is.

I struggle to find anything of value on this site. More and more it looks like a conspiracy theory platform. Maybe you could highlight the themes of 2010 and show us how valueable they were for readers. You might begin with all that "insider selling" info. How did that work out? If readers sold every time you mentioned that, would they have made money? Byron Wien 0 for 10, what's your track record? 0 for 1000?

Tue, 01/04/2011 - 00:01 | 845792 akak
akak's picture

They also post the uselessly bland and bankster-collaborationist ramblings of Leo Kolivakis, for no discernable reason that I can comprehend except perhaps for comic relief.

Tue, 01/04/2011 - 03:44 | 846000 omi
omi's picture

Here's how I look at it. Look for start of legs, they need to be tested. In short-term and /DX monthly which looks very suspicious like a W in building process.

 

http://i.imgur.com/xIx9H.gif

http://i.imgur.com/JTe6Y.png

 

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