Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog
I first wrote this blog post in My original blog on June 17, 2009. Here is the original post (Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog -- If you are a CAPS user, please rec the original blog post. It is another important and comprehensive post and needs as much exposure as possible --). I have decided to update the post right now for a few reasons:
1) *Everybody* is bearish on the US Dollar right now. The latest investor sentiment poll has something like 2-3% Dollar bulls right now. These are the same bearish conditions that were present in the stock market on March 9, and nearly the same bullish conditions that are present in the stock market right now. In short, we are at an extreme sentiment condition, which means things are ripe for a turnaround.
Now, there will be a lot of noise in the coming months when the dollar starts rallying and the stock market starts falling the dollar had put in a "major" bottom and proof that deflation will be the long term outcome. I don't think that is the case (by a long shot) and I think the qualifier "major" regarding the bottom for the dollar is up for interpretation. We will get a bottom that lasts 4-6 months, but I think the dollar will be headed down again.
... But wait? The dollar will be headed down and the market will be headed down. Isn't the weak dollar helping to fuel the stock market rally? Don't they need to move in opposite directions?
Original Post: http://marketthoughtsandanalysis.blogspot.com/2009/09/thoughts-on-us-dollar-analysis-of-usdx.html
.... Continued in Comments Section ....