My OperaThe Russell 2000 Will Fall Fast And Hard Now That The Dollar Rally Has Ended
Wednesday, August 13, 2008 9:38:49 AM
This article was updated on August 14, 2008
The Dollar Rally, which is also the US Financial Sector Rally and Fannie Mae and Freddie Mac Rescue Rally, ended August 12, 2008, and now the Russell 2000, IWM, will be turning lower.
The Stockcharts.com chart of the Dollar shows Peak Dollar occurred Monday December 11th, 2008 as the US Dollar fell from 76.25 to 75.85 on Tuesday August 12, 2008 ... $USD
The Russell 2000 was up 12% since 7/13/2008 to 8/12/2008 compared to 6% for the Nasdaq, and 4% for the S&P, and Dow as it is comprised of small US companies highly influenced by the finanical sector which rose on July 14, 2008 as the yen carry traders sold oil and bought the banks.
And just yesterday Tuesday August 12, 2008, the USD/JPY turned down ... USD/JPY. In fact the 8/12/2008 Greg Michalowski USD JPY Chart shows a complete breakdown -- it shows the USD JPY is a "failed investment instrument".
David Rodriguez of Daily FX wrote on Monday August 11, 2008: Currency Traders Sell US Dollars Against Yen
The FXStreet.com chart of the USD/JPY provides confirmation that Peak Dollar occurred on August 11, 2008 with a "bear cross" of "blue over red averges". This article is updated with the USD/JPY as of Thursday August 14, 2008 showing the Bear Cross in the USD/JPY.
Lacking liquidity from investing long via 0.5% interest loans from the Bank of Japan, disivenstment will be coming out of all stocks globally and especially the fianancial sector and dollar driven Russell 2000.
The yen carry traders will be selling the financial sector to take profit and the Russell 2000 shares will fall rapidly.
In addition to the Russell 2000 shares, these recent high flying consumer, value and financial ETFs will fall quickly as well: UYG, RKH, TKF, PJB, IXJ, XLF, URE, BBH, IIF, PBE, XHB, ICF, IHF, PXN, RWN, IFN, SMN.
Related important charts
Ongoing real-time INO real-time chart of the US $ Index
Ongoing real-time twenty four hour Kitco.com chart of the US Dollar, $USD
Ongoing real-time Yahoo Finance 5 day chart of the Russell 2000
Ongoing real-time MSN 5 day chart of the Russell 2000
Ongoing real-time Yahoo Finance 5 day chart of UUP
Ongoing real-time FXStreet.com horly chart of the USD/JPY
The Stockcharts.com daily chart of UUP
Investment application
The ongoing MSN Money charting service reports that both the US Stocks, VTI, and the world stocks, VEU, are now falling lower
Having passed through Peak Currencies and just now through Peak Dollar, wealth will be preserved by investing in gold and a limited amount of short selling.
The disadvantage of short selling is that while one has gains, the portfolio is continually loosing value as gold rises and the dollar falls.
Despite the recent fall of gold, the chart of gold relative to stocks, GLD:VTI, shows that gold is still valued more than fiat wealth ... GLD:VTI
Gold closed yestreday at $813, having touched $800, on an intraday basis. It is likely to be range bound between $800 and $870 before it breaks out again ... The bottom line here is that gold will sustain wealth while stocks fall ... $GOLD.
Now with the dollar surge ending, and all currencies having sunk, an epic investment sea change is going to occur, gold is going to arise as the defacto international currency.
A rising ratio of gold relative to the international currencies, GLD:DBV, from the range of 2.8 to 3.1 and going higher, will be clear cogent and convincing evidence that the neoliberal, floating currency exchange policies of Milton Friedman G-7 group, have failed ... GLD:DBV.
A wealth preservation investment has two components.
First, I recommend a two-thirds investment in GoldMoney.com and BullionVault.com to protect one's wealth from mutliple systemic risk event potentialities and the financial dislocations that will come from a war in Iran over its nuclear ambitions.
Second, I recommend that one have a one-third investment in a trust account with investment in these three following ETFs and ETNs ... DGP, SKF, FXP.
DGP ... 200% gold ... DGP -- it's oversold
SKF ... 200% inverse of the financial sector ... SKF -- it's on its way up again
FXP ... 200% inverse of China ... FXP -- it has left the launch pad, it is going to fall lower in a correction any day, before it continues dramatically higher.
The yen carry trade, that is the EUR/JPY, is actively unwinding on rising risk aversion to inflation, reduce growth opportunities and the level two assets and level three assets at banks
FXP is up as China, FXI, is down, as an Elliott Wave 3 Down in underway in the EUR/JPY, FXE:FXY, causing disinvestment from stocks world wide, VEU, and most aggressively in China and Brazil, where a lot of interest differential trade investment abides. Shares in China and Brazil since mid May 2008 have been aggresively sold off.
The Bank of Japan met on May 19, 2008, and then released minutes of that meeting in mid-June which related that rising inflation is an investment risk concern. Yen carry traders started to sell the yen immediately after the announcement, and the BRICs, EEB, rose in short sell covering, and then began to sell off as seen in this MSN.com chart.
Anchalee Worrachate and Stanley White of Bloomberg report in article Yen Rises to 12-Week High Against Euro as Carry Trades Pared that the yen rose to a 12-week high against the euro and its strongest in two months versus the British pound as Japanese investors cut bets on higher-yielding assets abroad.
Investors pared so-called carry trades on concern the global economy is slowing after a report showed Japan's economy contracted last quarter. The yen climbed to a two-year high against New Zealand's dollar and the strongest in four months versus Australia's as prices of commodities the nations export extended declines. The yen also rose for a third day against the U.S. dollar as financial companies led stocks lower worldwide.
``The yen is being driven higher by liquidation of carry trades,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. ``We are still in a risk- aversion type environment. Also, it's a seasonal story. Japanese investors tend to stop buying foreign currencies at this time of the year, which is a holiday season.''
The Dollar Rally, which is also the US Financial Sector Rally and Fannie Mae and Freddie Mac Rescue Rally, ended August 12, 2008, and now the Russell 2000, IWM, will be turning lower.
The Stockcharts.com chart of the Dollar shows Peak Dollar occurred Monday December 11th, 2008 as the US Dollar fell from 76.25 to 75.85 on Tuesday August 12, 2008 ... $USD
The Russell 2000 was up 12% since 7/13/2008 to 8/12/2008 compared to 6% for the Nasdaq, and 4% for the S&P, and Dow as it is comprised of small US companies highly influenced by the finanical sector which rose on July 14, 2008 as the yen carry traders sold oil and bought the banks.
And just yesterday Tuesday August 12, 2008, the USD/JPY turned down ... USD/JPY. In fact the 8/12/2008 Greg Michalowski USD JPY Chart shows a complete breakdown -- it shows the USD JPY is a "failed investment instrument".
David Rodriguez of Daily FX wrote on Monday August 11, 2008: Currency Traders Sell US Dollars Against Yen
The FXStreet.com chart of the USD/JPY provides confirmation that Peak Dollar occurred on August 11, 2008 with a "bear cross" of "blue over red averges". This article is updated with the USD/JPY as of Thursday August 14, 2008 showing the Bear Cross in the USD/JPY.
Lacking liquidity from investing long via 0.5% interest loans from the Bank of Japan, disivenstment will be coming out of all stocks globally and especially the fianancial sector and dollar driven Russell 2000.
The yen carry traders will be selling the financial sector to take profit and the Russell 2000 shares will fall rapidly.
In addition to the Russell 2000 shares, these recent high flying consumer, value and financial ETFs will fall quickly as well: UYG, RKH, TKF, PJB, IXJ, XLF, URE, BBH, IIF, PBE, XHB, ICF, IHF, PXN, RWN, IFN, SMN.
Related important charts
Ongoing real-time INO real-time chart of the US $ Index
Ongoing real-time twenty four hour Kitco.com chart of the US Dollar, $USD
Ongoing real-time Yahoo Finance 5 day chart of the Russell 2000
Ongoing real-time MSN 5 day chart of the Russell 2000
Ongoing real-time Yahoo Finance 5 day chart of UUP
Ongoing real-time FXStreet.com horly chart of the USD/JPY
The Stockcharts.com daily chart of UUP
Investment application
The ongoing MSN Money charting service reports that both the US Stocks, VTI, and the world stocks, VEU, are now falling lower
Having passed through Peak Currencies and just now through Peak Dollar, wealth will be preserved by investing in gold and a limited amount of short selling.
The disadvantage of short selling is that while one has gains, the portfolio is continually loosing value as gold rises and the dollar falls.
Despite the recent fall of gold, the chart of gold relative to stocks, GLD:VTI, shows that gold is still valued more than fiat wealth ... GLD:VTI
Gold closed yestreday at $813, having touched $800, on an intraday basis. It is likely to be range bound between $800 and $870 before it breaks out again ... The bottom line here is that gold will sustain wealth while stocks fall ... $GOLD.
Now with the dollar surge ending, and all currencies having sunk, an epic investment sea change is going to occur, gold is going to arise as the defacto international currency.
A rising ratio of gold relative to the international currencies, GLD:DBV, from the range of 2.8 to 3.1 and going higher, will be clear cogent and convincing evidence that the neoliberal, floating currency exchange policies of Milton Friedman G-7 group, have failed ... GLD:DBV.
A wealth preservation investment has two components.
First, I recommend a two-thirds investment in GoldMoney.com and BullionVault.com to protect one's wealth from mutliple systemic risk event potentialities and the financial dislocations that will come from a war in Iran over its nuclear ambitions.
Second, I recommend that one have a one-third investment in a trust account with investment in these three following ETFs and ETNs ... DGP, SKF, FXP.
DGP ... 200% gold ... DGP -- it's oversold
SKF ... 200% inverse of the financial sector ... SKF -- it's on its way up again
FXP ... 200% inverse of China ... FXP -- it has left the launch pad, it is going to fall lower in a correction any day, before it continues dramatically higher.
The yen carry trade, that is the EUR/JPY, is actively unwinding on rising risk aversion to inflation, reduce growth opportunities and the level two assets and level three assets at banks
FXP is up as China, FXI, is down, as an Elliott Wave 3 Down in underway in the EUR/JPY, FXE:FXY, causing disinvestment from stocks world wide, VEU, and most aggressively in China and Brazil, where a lot of interest differential trade investment abides. Shares in China and Brazil since mid May 2008 have been aggresively sold off.
The Bank of Japan met on May 19, 2008, and then released minutes of that meeting in mid-June which related that rising inflation is an investment risk concern. Yen carry traders started to sell the yen immediately after the announcement, and the BRICs, EEB, rose in short sell covering, and then began to sell off as seen in this MSN.com chart.
Anchalee Worrachate and Stanley White of Bloomberg report in article Yen Rises to 12-Week High Against Euro as Carry Trades Pared that the yen rose to a 12-week high against the euro and its strongest in two months versus the British pound as Japanese investors cut bets on higher-yielding assets abroad.
Investors pared so-called carry trades on concern the global economy is slowing after a report showed Japan's economy contracted last quarter. The yen climbed to a two-year high against New Zealand's dollar and the strongest in four months versus Australia's as prices of commodities the nations export extended declines. The yen also rose for a third day against the U.S. dollar as financial companies led stocks lower worldwide.
``The yen is being driven higher by liquidation of carry trades,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. ``We are still in a risk- aversion type environment. Also, it's a seasonal story. Japanese investors tend to stop buying foreign currencies at this time of the year, which is a holiday season.''
