Friday, May 8, 2009

US Dollar, Gold & Oil (May 11--15)

I might have made some ok calls over the past few weeks.

But one thing i did NOT see at all, and called wrong, was the U.S. Dollar falling off this hard...WOW.

The dollar was down 1.8% today.
Hammered again.....

Crushing the dollar = Stock Market rises *pretty much* (commodities go up...brings market up with it)

Yes, it's a fake way to push the market higher, but it's to be respected and traded none the less.
Fear of inflation? I personally don't see it anytime soon, but we shall see.

If Bob Smith owns a stock today that went up 1.7%....well Bob Smith's net worth was decreased today. Kinda sucks for Bob, don't it?

But anyhow, all that matters to me, is a trade set up.
We have one here, a VERY good one, on gold/oil. (dzz,dgp,gld,uso,dto,dxo...pick your poison)

I'm not calling a "swing" bottom to the dollar or "swing" top to gold/oil.
But I am leaning towards that.

I put some annotations on the dollar, gold and oil charts.
I "think" that the U.S. Dollar goes up hard, and gold and oil both sell off hard this coming week, like seriously hard. But that is just what i "think", I wont trade what i think, till the chart confirms my thoughts.

In regards to these charts. So instead of making a "call" that gold and oil sell off hard this week, which I do feel is the more probable trade coming this week. There is no need to call something before conformation.
The most beautiful thing here on this set up is, the charts are "this" conformation. So wait for it, get it, and TRADE IT!

Unless it's a total mini-dogi day across the board everywhere on Monday, I believe the direction will be decided on Monday, and the trade will last for the entire week. (from my experience of breakouts or breakdowns from a 60 min chart rsi wedge of that length/size)

Just let the chart tell you which way it wants to go, b/c it is going to, and when it does, there is going to be enough meat on those bones (long or short) to run it for the majority of next week.

Remember Stochs can stay pinned up or down for a very long time. (we know that from this rally!!! and from last year's crash too)

To me, by far the best signal is the RSI wedge (especially on gold, that is a very coiled and pretty wedge there, I can't wait to trade the hell out of it)

Wait for the RSI wedge to breakout or breakdown, and then jump aboard for the ride next week.
--I'll re-post next week, when it does w/ jmo targets of the move--


  1. we are not in inflation - instead we are in competitive currenct devaluation

  2. Start your printin.... i i i mean engines

  3. Erik, I have noticed that financial has not been your main focus lately. Is it because you don't trust it and considered the recent rally is mainly artificial? I found the rally in the financial is going out of whack that lost its sanity. It appears to me that the more bad news they print, the higher rally it goes. I am getting so many articles that are trying to pump the market to go much higher and stating the stocks are still way too cheap. It is like all the bad news in the last 18 months have never occurred. GS is heading to $140 and who knows, they probably will pump it much higher. I like the way you handle the market. You try to stay away from things you don't believe in rather than joining the party or go hard head against it. There are so many bulls out there from the blogs I have read. They keeping on changing their mind about the correction time and raising the SPX bar higher. It sure makes me absolutely nervous when there are huge increasing cheers on the bull side lately. Surely if everyone turns into the bull, it will be the exact time for the market to turn bear and give a big surprise. That's normally how it happens. Your idea of keeping mostly in cash is very smart. I am going to try to do exactly the same until the sanity returns. Cheers and thanks so much.

  4. stocker4949,

    Yep, I pretty much agree in that the financial rally has lost it's sanity. I don't like crowds. The "obvious" well, there is no such a thing. Bears blogs switching to Bullish is yet another "sign" of a market top as well. I prefer to still look for longs AND shorts, as there are many in this market. I have strayed away from financials of late on calls, b/c I like to trade with the least amount of variables possible. Although those might be the "most" profitable, they to me are also the most risky trades as well. My idea behind hedge plays is to lower risk, and play both sides.

    The mention of cash was not really a dominant theme, I was just trying to encourage massive profit taking for anyone in lcc or feed. (as the lcc exit was good timing). I lightened up alot for the "stress tests", b/c gaming it was a suckers play. Now that it is over however, I am bearish financials, and will be looking for entries to trade them that direction much more often.

    Hope your having a great weekend.

  5. The dollar is going down. If the rush to dollars fear trade is over, then the dollar will resume the fall it has been in for the last 8 years.

  6. Anon, i dont know...

    I think NEXT WEEK...the dollar rallies, and oil and gold sell off hard.

    again tho, ill be watching the chart, and wait for conformation to enter, but that's what i see is a good trade for THIS coming week


  7. Erik, I have the same feeling as you do that dollar rallies next week. I actually urged my mom and my brother to get into some dollar buying next week for some opportunity making. Many thanks for your reply and your fabulous insight that you post each day on your blog. They are so consistent and knowledgeable that it helps readers to decide the right direction and make better decision. It is hard to make money and so easy to lose money in this market. Discipline and wisdom are strongly required. You got both. I look forward to reading your post each day and to be inspired. Crowd makes me nervous and it is getting that way in the market. More bears are turning to bulls. Your honesty and great work are so valued and appreciated. Can't wait to read more of your inspiration and good piece next week.