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A Devastating Dollar Short-Squeeze Is Gathering Steam

By: Rick Ackerman, Rick's Picks


-- Posted Thursday, 15 December 2011 | | Disqus

The Dollar Index has blasted through key resistance at 80, threatening to “unwind” carry-traders who borrowed dollars for next to nothing in order to speculate on other assets. Chief among those assets is gold, which got savaged yesterday in a $100 selloff that seems hell-bent on testing September’s key low. The low lies at 1543, basis the Comex February contract, but we doubt that it will hold. In fact, earlier, we had told subscribers there was a 60% chance that February Gold was about to dive to at least 1459, a technical target derived from our proprietary Hidden Pivot Method.  We shall see. In any event, gold and silver –  as well as crude oil, the euro and the commodities complex– will come under heavy selling pressure if the short-squeeze on the dollar continues. If you’d like access our specific price targets for all of these trading vehicles in the days ahead, click here for a free trial to Rick’s Picks.

Concerning the U.S. dollar’s powerful surge, although it was driven initially by fears over the possible collapse of Europe’s financial house of cards, the rally has taken a life of its own that is being driven by dollar short-covering. The buying is not yet at panic levels, but a surge will be impossible to stop once if it picks up any more speed. Although the central banks can affect the markets for a short while with talk of bailouts, all of them acting together are puny relative to the quadrillion-dollar juggernaut that is about to fuel an unwind of the dollar carry-trade. Over the years, we’ve written many times about this potential Mother of All Short Squeezes. The paradox was, and is, that the dollar is intrinsically worthless, a form of debt rather than money. In point of fact, as we have pointed out here numerous times, the $20 bills in your wallet are worth no more, fundamentally, than the $1 bills.  Even so, that’s not going to help the Masters of the Universe who borrowed dollars promiscuously in order to leverage them to the sky.

Threat to Europe

From a technical standpoint, we’ve been expecting the NYBOT Dollar Index to hit a Hidden Pivot rally target at 81.11 and then back off. The surge is closing on that number now, up from around 75 in late October. But if the pivot resistance gives way easily — and especially if buyers re-energize the rally by pushing above the 81.44 peak recorded last November – the central banks and all those who are short dollars are in for some very rough sailing.  So will those who have been betting on a politically-induced rally in the euro. Our target for the March 2012 contract is 1.2556, and we expect it to hold. If not, the fragile credit edifice that has been holding Europe together is all but certain to crumble.

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com


-- Posted Thursday, 15 December 2011 | Digg This Article | Source: GoldSeek.com

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