Battered Dollar Syndrome No Surprise


Yesterday’s Wall Street Journal article  “Battered Dollar Roars Back, Catching Investors by Surprise” (1) provides a vital message about your current investments, savings and wealth.

The article says:  Investors are betting that an increasingly aggressive Fed and tumult in Europe will lift the currency.

The dollar has already bounced roughly 2.9% from its September lows and has risen in five of the past six weeks, powered by gains against the euro, yen and emerging-market currencies. Investors betting against the dollar have also cut back on their positions recently.

The surge in demand for dollars caught some investors off guard.

The strength (or weakness) of the US dollar can provide a vital clue on when Wall Street’s longest bull market will end.

A dollar surge can be an early warning to a steep, disastrous, stock market plunge.

The day before that Wall Street Journal article appeared, we sent this warning to Pi subscribers.

 

The U.S. dollar turned negative against most major rival currencies last week after an employment report showed the first decline in job creation in seven years even though wage growth was better-than-expected.

The weak dollar trend is still in force this week.  

The ICE (Intercontinental Exchange) futures contract is a leading benchmark for the international value of the US dollar and the world’s most widely-recognized traded currency index.

The U.S. Dollar Index DXY, measures the U.S. currency against six major rivals, – (euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc).

Dr. Richard Smith CEO of Tradestops.com (2) wrote this about the dollar.

Stock Market Headwinds Building

Headwinds are continuing to pick up steam for US stocks and there’s increasing evidence that the music is in danger of stopping.  In this case, the music is the declining US dollar.

Historically, the stock market is bullish when the US Dollar is bearish.  Yet, we knew that the dollar had moved strongly higher since its low in the first half of 2016.  It triggered a new Stock State Indicator (SSI) Entry signal in November.

tradestops.com

There’s increasing evidence that the dollar could be nearing the end of its fall. If it does, it will likely be a huge problem for US stocks.

Our time-cycle forecast for the dollar has been very accurate. It’s showing that the move lower in the dollar is about to end. There looks to be a short-term bounce through the end of November and then a large move higher in 2018 that could last almost the entire year.

tradestops.com

I’m currently looking for the US dollar to rally to the $95 level… and for the US stock market to take a breather… possibly even as much as 5% – 7%.

If the dollar falls below $91, however, it will be a huge confirmation of even higher prices and valuations for US stocks.

This is some math we can use to see how close we are (are rather the US stock market market is) to the edge of a crash.

Watch the dollar index DXY and the ETF UUP.

A drop below 91 is a signal that market strength is still alive.   A rise to 95 suggests that the trend of rising US shares is in a danger zone.

Currently DXY is closer to 95 than 95, at 93.79… but has been falling.

finance.yahoo

We can see a similar trend in the chart of the Powershares ETF UPP.   The falling dollar trend reversal began last month.

finance.yahoo

finance.yahoo.com/chart/UUP

UPP  seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures index. The index is comprised solely of long futures contracts. The futures contract is designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

The trend of a weakening dollar was continuing this morning as the chart at Market Watch shows.

market watch

You can keep track of the trend at the Market Watch website.

The US dollar US stock market relationship is one small clue we can use to skirt the edge as Wall Street continues its longest bull market in history.

To read yesterday’s entire Pi message, please read below how to subscribe to the Purposeful investing Course (Pi).

Gary

(1) www.wsj.com: Battered dollar roars back

(2) Learn how Tradestops.com can improve investing discipline.


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