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USD Flexing its Muscles

December 18, 2009 10:04 am by Dean Morel

The USD is reminding us who is boss. It has broken out of its downtrend and in so doing is altering the price of many other assets.

usd-20091218

I’ll let someone else state my opinion.

Within a strong bull market, a price correction back down to the 50 day moving average (50DMA) is considered healthy. A further correction back down to the 200DMA, if the price holds at or above that level is considered by many to be a “back up the truck” moment.

The dollar is in a bear market. So, as far as the dollar chart is concerned, the price of the dollar index has risen and the 50DMA has been punctured from the downside. I would consider this to be a healthy correction still within the dollar bear. The 200DMA is falling and it looks as though right around the 78 level would be the testing of the resistance.

I wouldn’t even begin to consider the dollar bear over unless we see the close above that level (above the 200DMA).

Anything in between I consider to be within the normal “noise” parameters.

via TMF: Predicting dollar & S&P500 from bond rates / Macro Economic Trends and Risks.

There was another quote in that thread which I really liked.

“Mind you, 99% of trading seems to be human psychology … which doesn’t change one iota between generations.”

Disclosure: Short position in USD. Though overall net long exposure to USD.

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2 Comments »

  • Anonymous said:

    Hi Dean, if you are into fundamental stocks with momentum, what do you think of JBH ? This is the best uptrend line in a stock I’ve seen for a while. Of course at some stage it will breakdown or turn but currently it has good fundamentals (ROE etc support price around $20-30) and it has strongly rewarded anyone who has bought on pullbacks. It reminds me of timbercorp earlier on or the late 90′s dotcom bubble. It is also a daytraders stock as the intraday movement is 2-5%.

  • Dean Morel said:

    Roger Montgomery likes JBH. Retail is not in my wheelhouse so I mainly stay away and underweight the sector in my portfolio. The one thing I would check is percentage of sales from CDs. That revenue stream, which was their original is bound to dry up. As you say it sure has momentum. Just remember their earnings could go up 60%, but if their growth slows then the P/E will drop back to the sector average of 14 and the share price will go no where. It’s doesn’t appear to be a bargain to me, but as I said retail is not my thing.

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