My OperaPeak Dollar
Thursday, July 24, 2008 5:45:42 AM
I. Introduction
We have reached Peak Dollar.
The international financial market place knows that the cost of rescuing the GSE is not the $25 Billion mentioned in Congressional testimony; but for all practical purposes unlimited, as brought out in Bonddad Blog article What's the Cost For Fannie and Freddie?.
The bond market place has effectively ended the AAA rating on the US Treasury Bond with Congress now giving Bernanke authority over the GSEs, providing them liquidity as well as capital.
If stock trader and software developer Tim Knight who wrote article The Rescue, has figured out who the winners and losers are, you can bet the foreign investors have as well. And they, like Mr. Knight, who believes that the US "slips that much closer into oblivion with this travesty", will be taking action -- selling US Treasuries, stocks and the US dollar.
Capitalism died with the Federal Reserve assisted JP Morgan buy out Bear Stearns. And now the US Congress, in granting Bernanke authority to open a lending window to the GSEs, and capitalize them as well, together with passing the Dodd Frank Housing Bill, is simply putting the nails in Capitalism's coffin. The Congressional action privatizes wealth and gain to bankers, and socializes losses onto the US taxpayer.
II. Chart Analysis
The charts presented below show the six day long Fannie Mae and Freddie Mac Rescue Rally, has now run its course: the US Dollar will now be turning lower.
A. Commodities are likely to hold at their current level
Oil, USO, has fallen to major support at $100.
Gold, GLD, closed at 90.50, and could easily fall lower to 89 or 89; but if oil holds here, gold is likely to as well.
Commodities, RJI, has fallen to major support at 12.50; it could easily fall lower yet to find support somewhat lower at 12.25.
B. Stocks have likely reached their rally high
Bank of America, BAC, has risen to 33.44 which is near resistance at 34.
Citigroup, C, has risen to resistance at 21.12.
The chart of Fannie Mae, FNM, shows a long legged doji candlestick at 15.00 indicating completion of the battle between the bulls and the bears; although one can no longer short this and eighteen other stocks, the peak value of this GSE has been reached.
The chart of the financial sector, IYF, shows a hammer completion at resistance at 74.85.
The harami candlestick in the chart of the investment bankers, KCE; and the gravestone doji in the chart of the banks, KBE, at resistance at 34, relate the GSE Rescue Rally is over.
The US stocks, VTI, are likely to fall lower now, and the US Dollar will fall lower with them as well.
C. The Yen is headed higher and the Euro lower
The weekly chart of EUR/JPY, FXE:FXY, the barometer of the yen carry trade, shows a dark cloud covering hammer candlestick, in an ascending wedge, with rising price on falling volume: a fall lower in value is imminent. This means there will be disinvestment from stocks; traders will be taking profits and buying yen, FXY, to repay their 0.5% interest loans.
The ongoing three month chart of the Yen, FXY, indicates a near double bottom, shown here: the Yen will now be moving higher. Notice how it moved higher in mid June as investors bought the Yen after the minutes of the Bank of Japan, BoJ, were released to news services such as CEP News, relating that rising inflation poses an investment risk.
The Euro, FXE, is headed down as can be seen in the EUR/USD chart courtesy of ActionForex.com in article Action Insight Mid-Day 7-23-2008.
Another scenario has all currencies falling lower in a death spiral together; with the Euro, falling more than the yen.
D. Interest rates are heading higher and the Dollar lower
The interest rate on the 30 Year US Treasury Bond, $TYX, has been rising ever since the Freddie Mac and Fannie Mae Rescue Rally started; this trend will continue.
The ongoing five day chart of USD/JPY has retraced near its recent high of 108.58 to close at 107.74.
The weekly chart of the dollar laden Powershares DB G10 Currency Harvest Fund, DBV, shows bearish harami. The wells of liquidity have run dry, and the spigots of liquidity for stock investing have been turned off -- the Fed is running out of bullets, and risk aversion is rising to using the BoJ lending window now that inflation is raising its head, so the almighty dollar is in decline. However, those with good credit history with the BoJ will have margin for going short or investing in gold.
The daily chart, DBV, shows bearish engulfing.
The US Dollar, $USD, has risen to its 50 day moving average at $72.79.
The direction for the US Dollar is now down.
Investment Application
In as much as the bear stock market is set to resume, one should consider investing bearishly by going long these Proshares 200% inverse ETFs.
Google Finance Comparative Chart
SKF Financial
SRS Real Estate
SJF Russell 1000 Value
FXP China
SCC Consumer Services
Google Comparative Chart
DXD Dow 30
TLL Telecommunications
RXD Health Care
SSG Semiconductors
TBT US Treasuries
The Financial Ninja relates: Financials: Time to Go Ultra Short, Again
SuccessTrading reports: Top Oversold ETFs for Traders: SKF, SJF, DXD.
Of course, only TBT has been successful in short selling of late; and in fact it may very well fall lower in value, as the bear market resumes, and investors sell stock, and park some of their proceeds in US Treasuries TLT. Yes a fall lower will be the buy signal in this ETF. For those who do short sell, I recommend that one be ready to allocate twenty percent of one's portfolio here, so that while the stock shorts are not performing this will be.
The chart of SSG shows yesterday's gain as investors sold out of Texas Instruments, TXN; and the chart shows today's loss, as semiconductors, XSD, moved up with the Nasdaq, QQQQ.
The chart of DXD shows today's 1% loss as the DOW, DIA, traded up 0.46%.
Having presented the option of short selling, my investment recommendation is to be invested in gold as although one will have gains from short selling, the value of one's portfolio is going to be forever depreciated by a falling dollar.
I don't want a dollar denominated anything: the US dollar is going to experience total devastation as regional trading alliances and currencies arise, and as China uses its $2 Trillion or more Forex reserves, to become the world's economic super power.
Elaine Meinel Supkis writes frequently of the Rising Giant Of The East with her article Congress Nationalizes Mortgage Debts being just one example.
My investment maxim is simple: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength.
Therefore, the current fall in gold presents a buying opportunity.
A strong investment demand for gold began in late 2007 when the federal reserve began to aggressively drop interest rates. The US Central Bank, in lowering interest rates and providing facilities of TAF, TSLF, and PDCF, has debased the US currency and stimulated the purchase of gold. This investment demand for gold can be seen in the chart of gold relative to stocks: GLD:VTI. Notice how the demand picked up in May; this was when the institutional investors sold their high yield dividend paying stocks, PEY, to go long commodity futures and commodity indexed mutual funds and ETFs with the yen carry traders, investing in RJI, GLD, USO, and DBA. Notice how the investment demand picked up even more sharply in late June, as the minutes of the May meeting of the Bank of Japan were released indicating that inflation is an investment risk factor: the yen carry investors sold stocks and bought gold. Then there was the commodity sell off to take profits. Now investors will once again be selling stocks and buying gold.
The investment demand for gold can also be seen in the chart of gold relative to oil: GLD:USO.
The US has told it must either cooperate or face a confrontation within 10 days; their cooperation is unlikely; the US and the EU is likely to carry out a military strike to eliminate the security threat poised by Iran's nuclear ambitions. Either this will result in a systemic risk event, or a systemic risk event will arise from some other source, where one may not have full and immediate access to one's wealth to invest in gold at that time.
Therefore, I recommend that one start to now to 'dollar cost average' a diversified investment in gold day-by-day at BullionVault.com, GoldMoney.com, and in a gold ETF, in a trust account, in Switzerland.
Chart of gold, $GOLD, shows today's close at $922.
We have reached Peak Dollar.
The international financial market place knows that the cost of rescuing the GSE is not the $25 Billion mentioned in Congressional testimony; but for all practical purposes unlimited, as brought out in Bonddad Blog article What's the Cost For Fannie and Freddie?.
The bond market place has effectively ended the AAA rating on the US Treasury Bond with Congress now giving Bernanke authority over the GSEs, providing them liquidity as well as capital.
If stock trader and software developer Tim Knight who wrote article The Rescue, has figured out who the winners and losers are, you can bet the foreign investors have as well. And they, like Mr. Knight, who believes that the US "slips that much closer into oblivion with this travesty", will be taking action -- selling US Treasuries, stocks and the US dollar.
Capitalism died with the Federal Reserve assisted JP Morgan buy out Bear Stearns. And now the US Congress, in granting Bernanke authority to open a lending window to the GSEs, and capitalize them as well, together with passing the Dodd Frank Housing Bill, is simply putting the nails in Capitalism's coffin. The Congressional action privatizes wealth and gain to bankers, and socializes losses onto the US taxpayer.
II. Chart Analysis
The charts presented below show the six day long Fannie Mae and Freddie Mac Rescue Rally, has now run its course: the US Dollar will now be turning lower.
A. Commodities are likely to hold at their current level
Oil, USO, has fallen to major support at $100.
Gold, GLD, closed at 90.50, and could easily fall lower to 89 or 89; but if oil holds here, gold is likely to as well.
Commodities, RJI, has fallen to major support at 12.50; it could easily fall lower yet to find support somewhat lower at 12.25.
B. Stocks have likely reached their rally high
Bank of America, BAC, has risen to 33.44 which is near resistance at 34.
Citigroup, C, has risen to resistance at 21.12.
The chart of Fannie Mae, FNM, shows a long legged doji candlestick at 15.00 indicating completion of the battle between the bulls and the bears; although one can no longer short this and eighteen other stocks, the peak value of this GSE has been reached.
The chart of the financial sector, IYF, shows a hammer completion at resistance at 74.85.
The harami candlestick in the chart of the investment bankers, KCE; and the gravestone doji in the chart of the banks, KBE, at resistance at 34, relate the GSE Rescue Rally is over.
The US stocks, VTI, are likely to fall lower now, and the US Dollar will fall lower with them as well.
C. The Yen is headed higher and the Euro lower
The weekly chart of EUR/JPY, FXE:FXY, the barometer of the yen carry trade, shows a dark cloud covering hammer candlestick, in an ascending wedge, with rising price on falling volume: a fall lower in value is imminent. This means there will be disinvestment from stocks; traders will be taking profits and buying yen, FXY, to repay their 0.5% interest loans.
The ongoing three month chart of the Yen, FXY, indicates a near double bottom, shown here: the Yen will now be moving higher. Notice how it moved higher in mid June as investors bought the Yen after the minutes of the Bank of Japan, BoJ, were released to news services such as CEP News, relating that rising inflation poses an investment risk.
The Euro, FXE, is headed down as can be seen in the EUR/USD chart courtesy of ActionForex.com in article Action Insight Mid-Day 7-23-2008.
Another scenario has all currencies falling lower in a death spiral together; with the Euro, falling more than the yen.
D. Interest rates are heading higher and the Dollar lower
The interest rate on the 30 Year US Treasury Bond, $TYX, has been rising ever since the Freddie Mac and Fannie Mae Rescue Rally started; this trend will continue.
The ongoing five day chart of USD/JPY has retraced near its recent high of 108.58 to close at 107.74.
The weekly chart of the dollar laden Powershares DB G10 Currency Harvest Fund, DBV, shows bearish harami. The wells of liquidity have run dry, and the spigots of liquidity for stock investing have been turned off -- the Fed is running out of bullets, and risk aversion is rising to using the BoJ lending window now that inflation is raising its head, so the almighty dollar is in decline. However, those with good credit history with the BoJ will have margin for going short or investing in gold.
The daily chart, DBV, shows bearish engulfing.
The US Dollar, $USD, has risen to its 50 day moving average at $72.79.
The direction for the US Dollar is now down.
Investment Application
In as much as the bear stock market is set to resume, one should consider investing bearishly by going long these Proshares 200% inverse ETFs.
Google Finance Comparative Chart
SKF Financial
SRS Real Estate
SJF Russell 1000 Value
FXP China
SCC Consumer Services
Google Comparative Chart
DXD Dow 30
TLL Telecommunications
RXD Health Care
SSG Semiconductors
TBT US Treasuries
The Financial Ninja relates: Financials: Time to Go Ultra Short, Again
SuccessTrading reports: Top Oversold ETFs for Traders: SKF, SJF, DXD.
Of course, only TBT has been successful in short selling of late; and in fact it may very well fall lower in value, as the bear market resumes, and investors sell stock, and park some of their proceeds in US Treasuries TLT. Yes a fall lower will be the buy signal in this ETF. For those who do short sell, I recommend that one be ready to allocate twenty percent of one's portfolio here, so that while the stock shorts are not performing this will be.
The chart of SSG shows yesterday's gain as investors sold out of Texas Instruments, TXN; and the chart shows today's loss, as semiconductors, XSD, moved up with the Nasdaq, QQQQ.
The chart of DXD shows today's 1% loss as the DOW, DIA, traded up 0.46%.
Having presented the option of short selling, my investment recommendation is to be invested in gold as although one will have gains from short selling, the value of one's portfolio is going to be forever depreciated by a falling dollar.
I don't want a dollar denominated anything: the US dollar is going to experience total devastation as regional trading alliances and currencies arise, and as China uses its $2 Trillion or more Forex reserves, to become the world's economic super power.
Elaine Meinel Supkis writes frequently of the Rising Giant Of The East with her article Congress Nationalizes Mortgage Debts being just one example.
My investment maxim is simple: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength.
Therefore, the current fall in gold presents a buying opportunity.
A strong investment demand for gold began in late 2007 when the federal reserve began to aggressively drop interest rates. The US Central Bank, in lowering interest rates and providing facilities of TAF, TSLF, and PDCF, has debased the US currency and stimulated the purchase of gold. This investment demand for gold can be seen in the chart of gold relative to stocks: GLD:VTI. Notice how the demand picked up in May; this was when the institutional investors sold their high yield dividend paying stocks, PEY, to go long commodity futures and commodity indexed mutual funds and ETFs with the yen carry traders, investing in RJI, GLD, USO, and DBA. Notice how the investment demand picked up even more sharply in late June, as the minutes of the May meeting of the Bank of Japan were released indicating that inflation is an investment risk factor: the yen carry investors sold stocks and bought gold. Then there was the commodity sell off to take profits. Now investors will once again be selling stocks and buying gold.
The investment demand for gold can also be seen in the chart of gold relative to oil: GLD:USO.
The US has told it must either cooperate or face a confrontation within 10 days; their cooperation is unlikely; the US and the EU is likely to carry out a military strike to eliminate the security threat poised by Iran's nuclear ambitions. Either this will result in a systemic risk event, or a systemic risk event will arise from some other source, where one may not have full and immediate access to one's wealth to invest in gold at that time.
Therefore, I recommend that one start to now to 'dollar cost average' a diversified investment in gold day-by-day at BullionVault.com, GoldMoney.com, and in a gold ETF, in a trust account, in Switzerland.
Chart of gold, $GOLD, shows today's close at $922.
