Monday, September 14, 2009

U.S. Dollar

My apologies for the lack of charts. I had a computer problem that was not corrected until late yesterday and here in mid-Michigan it was far too nice a day to be sitting behind a terminal laboring away. Now that I am up and running I will be posting as promised.

I want to touch on something I have been chewing on, the U.S. Dollar.

Right now everyone and their brother is U.S. dollar bearish. Everywhere I turn the crowd is universally bearish on the dollar. To their credit, the bearish story on the U.S. buck is extraordinarily compelling.
But, (isn't there always a but) I caught some very interesting numbers from the Daily Sentiment Index people which currently show U.S. dollar bulls level currently at, drumroll please........... 3% bullish.

No readers that is not a misprint, it is at a 3% bullish reading! 3 out of 100 traders are bullish! For what its worth this index sat at over 90% bullish back in March when the US dollar index was sitting north of 89. Currently it is south of 77
. The last time the sentiment index was this low was back in early 2008 when it sat at around 5% bullish as the dollar bottomed around 71.

If this is a major dollar bottom, (which I think it is), where might equities be headed? Down I would think. So, based on this and my inherent belief that we are in a deflationary environment I am very fearful for all stocks and commodities in general. And yes dear reader this includes Gold. I own bullion, both gold and silver, as it is the ultimate insurance policy that I never have to worry if if can pay the claim. Hence this idiot blogger sleeps extraordinarily well at night.

Everyone is pounding the table on Gold and this makes this trader/blogger very,very nervous. Yes I can see the charts, yes I can see the writing on the wall with all the issues that make the story on gold watertight. But the gold trade, right now anyway, just seems to easy.

As a trader I was taught that the hardest trade is the right trade. As a broker in my former life I learned that the more the clients fought me and looked at me like I had an eye in the middle of my forehead that this was often the right trade. For what it's worth I fear shakout of shakeouts could be in store for the gold bulls. I hope I am wrong but the trade seems awfully crowded with everone on one side of the boat, and I do know (first hand !) what happens when everyone is on one side of the perverebial boat !

I worry so when I see sentiment readers that are this far gone. It does not mean that things need to turn today but when the engine light is on, the oil light is flashing, the RPM gauge in north of 7k it would seem prudent to pay attention. That is if your subsistence were not dependent on the buying and selling of others, hence the crumb chasing, perma-buy calls emanating from most of Wall St. 24/7.

Good speculating and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Short 1 unit JP Morgan ticker JPM @ $43.66 stop @ $43.66
Short 1 unit Abercrombie ticker ANF @ $33.23 stop @ $33.33

1 comment:

Saoirse said...

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