-- Posted Friday, 16 January 2004 | Digg This Article

No man is happy without a delusion of some kind. Delusions are as necessary to our happiness as realities.

Christian Nevell Bovee 1820-1904, American Author, Lawyer

Remember those horror movies that we all have seen at some stage in our lives where the Zombie or some monstrosity rises from the dead. This monstrosity than seeks to hunt and persecute the living.

Well we are about to witness another resurrection of a monster, only this monster is real, it is none other than the worthless over printed US dollar. The plunge has been extremely severe and its purpose has been served. The agenda was simply to make sure that profits of US corporations went up drastically and they have. Wall Street is over flowing with money. New York City just declared over a billion-dollar surplus. Last time this year they were suffering from a 6 billion deficit. This year everything is fine and the number one reason given was due to the healthy profits Wall Street generated.

Before I go into the other reasons of why the dollar is poised to rise. Let me go over some technical reasons.

If you look at the chart above you will notice the following

A)    The US dollar has 3 down trend lines, the main one and two branches. This indicates an very extremely oversold condition, that is dangerously close to putting in a bottom in the immediate future

B)    You will notice that the RSI index is showing the classic signs of positive divergence. As the dollar index kept dropping to lower highs, the RSI index actually put in higher lows

C)     Macds are also showing the same pattern, but its more pronounced and easier to see. You will see that with each subsequent low of the dollar index, the macds made higher lows.

All these signs are extremely bullish and indicate some sort of technical rally is imminent.

In addition the Asians will not support a free fall of the dollar and neither will the Feds. Sooner or later there is going to be an all out concentrated effort to stop the bleeding. When all these forces join and intervene together almost nothing can stop them. In the short term they will win.  Here is where it will get tricky. Once the intervention is successful, the big speculators with huge pockets will jump aboard this train. When they start to play they will drive the dollar even higher. Soon everyone will believe that the Dollar is alive and drive it to heights that most thought impossible, just as they drove the Euro.

The long Euro short dollar trade became the easiest play in town. It won’t be that easy anymore. In fact the bleeding has already started and soon the massacre will take on new heights as all these idiots who thought one simply makes money by following the masses are systematically financially decapitated. The streets will be crimson with blood. Just like the Dow bears have been bleeding to death and are now seeking massive amounts of transfusion so will the dollar bears be bled dry and left to rot.

This has noting to do with fundamentals but with simple mass psychology and greed. In order for the big guys to make money, they have to kill thousands of small guys to feed their huge appetites and a lot of small guys are now playing the dollar short, euro long game. So watch the massacre start soon.

We are slowly but surely positioning our subscribers to benefit from this move in the dollar and so can the astute investor with the information we have just provided. Do some research and make sure you understand the risk to reward ratio before just jumping in with both feet.

For a limited time I am posting free weekly commentaries on the direction of the Dow. It was supposed to be done bi weekly but I just don’t have the time. When I mean for a limited time, I don’t mean that we are looking to charge for it. What I mean is that I might just not have the time to do it and will just have to suddenly stop.    Sol's weekly Market Commentary 

Unlike grown ups, children have little need to deceive themselves.

Johann Wolfgang Von Goethe 1749-1832, German Poet, Dramatist, Novelist

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Contribution by James Rothschild, CEO www.Trader007.com and guest writer for “The Highlanders Trading Club”     http://www.drscoop.com

We all know that the US dollar has been overvalued. For something that is should be worth nothing [other than the value of the paper and ink], you can still  purchase goods and services. But we all enjoy AND benefit from the illusion that the dollar is of value.

We don’t like changing our beliefs that Uncle Sam represents value, and used to be backed by gold, but went out on his own word. Non US businesses were able to sell their products into the US, despite various trade barriers, because their domestic costs were lower. We got used to American tourists flooding our shores with their big spending ways. We are scared & we want them back.

Mention should be made of economies with unsupported rural sectors. Here the farmers have no protection other than the haven they found in the falling of their native currency, and now this has gone as their currency rose against the $US.

So all around we are saying, we want to hang on to our illusion. Let the party roll on; we can live with a higher $US so GIVE it BACK!

Spleen venting never achieves much, so let’s get real and see what the charts show. All are long term weekly charts. Each shows a potential 3-trend line break. Significant retracements and consolidation periods follow these.

The Aus. $ is over-stretched. It is heading into serious resistance at 80c to the $US and will head south soon.

Alan Lunt Guest Analyst at the Tactical Investor

He resides in New Zealand

 

The terms we use in the markets amuse me. The one that springs to mind is CORRECTION. What is it that we are correcting from, did it need correcting, and will the result be the correct one? Would not the motor terms of "advance" and "retard" be more correct? Think of the US dollar, people say it is correcting, but which way is the right way. I like to think of it as a retarded beast, and an advance is now in order. Nothing ever only goes in one direction, it splutters and coughs, clears momentarily, advances, tires, then retreats

 

The dollar is in one of it’s cyclical phases, it is doing no more than could be expected from a normal business cycle. As it strengthened the benefits of increased spending power were utilised and the nation got into the habit of doing exactly that, spending. Then when the ratios of income to expenditure got out of whack the natural thing to happen was for the dollar to loose value. But the problem is that the debt levels didn't fall as spending power declined. What happens is a tightening of the belt under normal conditions. But there is nothing normal about the present conditions. That excess liquidity that is being pumped into the system is keeping the consumer spending. The result is a mismatch between income and expenditure. A mismatch that is being financed by credit. A deficit that is being financed by the moneymen.

 

So what of the dollar?  The market will recognise that the business cycle is not cycling any more. This will add to confidence and that confidence will make the dollar advance. It will continue until the error is recognised and the dollar bear comes back. Everybody is only looking out for himself or herself and that self-indulgence will come home to roost. If the human beast were a collective animal there would be no business cycle, no fluctuations of currency values, no one doing better or worse than his neighbour and no Government.

 

Now we are getting to the heart of the matter. Government. It wants to be a collective beast that rules. A misnomer if ever there was. The Government is a levelling agent, it levels everything it can except itself because those in Government want power, not equality for themselves or their ideological masters. Just read up on the 7 deadly sins and everything will become clear. But how does this relate to the dollar advancing from here? The Governments masters are in the money game, and there is more money to be made if BOTH directions are taken. Those with the biggest cheque (check) book manipulate the short term. In the long term the market will go in the direction it wants but the short term can be manipulated. The best reason of the lot to put a bomb under the dollar is gold. The time is coming to teach the gold bulls a lesson about who is master. Power. Governments don't want any other form of money except fiat. It is their biggest threat.  Just imagine what would happen if people controlled money and not Government. All those ideas about social levelling would go sailing out the window. They would not be able to manufacture money any more; they would have constraints placed on them that would be unacceptable. They would loose control. When the dollar rallies from here look for no other reason than the wants of your elected masters.

 

Any  "correction" needs to be at administrative level and not with the business cycle.

 

There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the US national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.

Richard Feynman (1918 - 1988)

 

 Contact info allies1111@tacticalinvestor.com

-- Posted Friday, 16 January 2004 | Digg This Article

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