Thursday, July 15, 2010

Has The Dollar Bear Emerged From A Brief Hibernation?

Back in May when the U.S. dollar index hit 84, I commented that it might be ready to rollover and go lower.   I made the same call when it traded thru 86 in June.  One particular reader was constantly busting my stones over this call.  Well, here we are in mid-July, and the dollar - having topped out just above the 88 level, has crashed overnight below 83 as I write this.  Here is the weekly chart of the U.S. dollar index, which if I may say so myself, looks pretty bearish: 

For the sake of grace and humility, I will just say that anyone who shorted the dollar on my original call at 84 and held onto the position - minimally (without adding to the short at higher levels) - is now in a nice profit position.  Furthermore, since gold has outperformed the dollar during this period, if you shorted the dollar at 84 and added to your gold position, you are happy x 2.

On a fundamental basis, if someone showed me the fiscal condition of every country in Europe, England, Japan and the U.S., without identifying the country with the balance sheet and budget statement, I would identify the U.S. as by far being in the most fundamentally hopeless condition. 

To be sure, the dollar is a bit oversold technically and could bounce back up to the 84 level as those who shorted it at 88 take some profits.  But using basic fundamental analysis on the economic, political and financial condition of the United States, I would be adding to my dollar short position on every bounce. You can look at the chart and assess where you would take some trading profits, but I believe that there is a very real probability that we could see the dollar ultimately go down and test that 72 "do or die" level sometime during the next 12 months.

BP update:  I see there's no news on the renewed cap testing.  Word to me is that the cap has failed, the sea-floor fracture at the wellhead is spreading and fish down by the Yucatan Peninsula in Mexico are being pulled out of the water with tar-balls in their belly.  The oil dispersants being used by Haliburton are causing the oil to sink with the dispersant to the seafloor and the dispersant is heating up the massive methane hydrate pools which are accumulating on the seafloor from the leak.  This has the potential to create an incredibly powerful greenhouse gas.


  1. Good morning Dave

    The dollar at a new low this morning, if the Markets plan on making any kind of substantial move here, the ( cough ) mysterious Gold manipulator @ $1215 has to let it rise, otherwise the markets are going no where.

  2. Currency trading is a bit risky for my taste, especially since nearly every currency these days is FIAT. Your chart shows that the US dollar is dropping a bit faster than the other declining currencies, mostly the Euro, as the Euro is most of the 'basket' that the dollar is measured against. You must know much more about currency trading than I do! I'm just buying PM's as that's about the limit of my financial knowledge.

    In my opinion, after much reading on theOilDrum and other websites, is that they do NOT want to increase the pressure on the well bore. There is definitely a rupture in the well casing somewhere, and BP isn't sharing what it knows. Trying to cap it will cause the crude to escape into the rocks or mud around the well bore, which will make the well unkillable if the rupture gets large enough. The crude may take years to surface, but it will bubble up someday if the pipe lining the well (the well 'casing') gets shredded too much. The well cap is all smoke and mirrors-the relief well is the best way to kill the wild well, maybe the only way. If I am right, the cap will magically come on line as soon as the relief well breaks thru to the wild well and they start pumping the 'kill pill,' which will hopefully enable any cement they pump down hole to stay in position long enough to solidify. I hope the relief well works...I live too close to this mess.

  3. i am watching the following cross $gold/$usb at It has a nice ceiling at 10. It tried to go above 10 but was rejected everytime. I think it another sign of market manipulation but it could be just a chance observation.

    Any thoughts?

    "Gold should be the second most important asset in man's portfolio."

  4. no doubt the chart is showing the manipulation going on. when it breaks over 10 and holds, katy bar the door lol.

    what is the 1st most important asset per your quote?

  5. Redneckistanian.

    Agreed, it's a big mess.

    What's needed is a magician able to get down to the details, wave his wand, and wipe throughout the entire area clean.

    Everything would then be fine, the sun would shine, mother nature would restore the balance, business would improve, and folks would move back to home.

    Oh well.

  6. I really hate Harry Reid. I can't WAIT to watch the voters in NV toss his corrupt, shitbird ass out of the Senate. What a fucking scumbag he is.

  7. If I EVER get the opportunity, I'm going kick him in the balls so hard that he'll be speaking in a crackly soprano voice for the rest of his life.

  8. Dave-

    I wish you would tell us how you really feel;-)

  9. ROFLMAO - i won't hold back next time

  10. A Man's Health

    "Gold should be the second most important asset in man's portfolio."