Is The Greenback Ready To Rock & Roll?
posted Jul 21, 2004 at 12:48AM
One of the things I like doing is looking at price action during a stochastics cycle from top to bottom.
In a bull market one expects prices to move more strongly on an up cycle and give up gains more slowly while the stochastics get "reloaded"
Of course the reverse happens in a bear market..of which the US weekly chart gives many examples.
What is interesting is that for the first time in years the US dollar looks to have gone through a completel weekly stochastics cycle and keeping some its gains.
It implies that the move down IS corrective and that a new upleg is imminent which will likely generate new recovery highs highs.
Remember even a 38% retrace, hardly an impossiblility, would still have a dramatic impact on all things equity, particularly gold.
Remember when the DOW and the NASDAQ bottomed?...did anyone even consider that a 50% retrace of the entire move was in the cards?
The USD will have higher short term interest rates (and more importantly the unwinding of the carry trade all in an econmic environment which will reek of deflationary pressure.
Remember every barrel of oil purchased creates the demand for 40 plus greenbacks. High oil has the effect of sucking liquidity out of all other areas of the economic system...and in the perverse way that the market works, actually can become a deflationary force.
Well that's the way I see things shaping up. I think it is going to be hard making money on the long side on anything equity.
The above is written for educational/entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice. The commentary simply reflects the opinion of the authour on the current status of the market. It is prone to error and to change with no notice which itself is again prone to error.